Malaysia’s palm oil reserves rise most in two years on output jump
11/09/2023 (The Edge Malaysia) - Palm oil inventories in Malaysia surged the most in two years to cross the two-million-tonne level on stronger-than-expected production and weaker exports in the second-biggest grower.
Stockpiles jumped 23% in August from a month earlier to 2.12 million tonnes, according to a report by the Malaysian Palm Oil Board on Monday. That’s the biggest monthly increase since August 2021 and the highest since January. It’s also above the 1.90 million tonnes estimated in a Bloomberg survey.
“The report is a shocker and is clearly bearish for palm oil,” said Anilkumar Bagani, head of research at Mumbai-based Sunvin Group. End-stocks are up by a “staggering” amount, compared with July, as exports fell and local consumption dropped 27% to around 251,000 tonnes, he said.
Crude palm oil production climbed 8.9% to a 10-month high of 1.75 million tonnes, compared with 1.73 million tonnes predicted in the survey. The MPOB report showed Malaysian production climbed for a second month in August, after rising 11.2% in July.
The production trend has been confusing, Bagani said.
Although industry players were anticipating that El Niño’s impact could curb palm yields from October, there’s still no indication of that happening, he said.
Exports fell 9.8% to 1.22 million tonnes, against the forecast of 1.33 million tonnes, the report showed.
Benchmark palm oil futures in Kuala Lumpur rose as much as 0.8% and fell as much as 0.5% before the MPOB data, and traded 0.2% lower at RM3,822 by the midday break. Despite short bursts of price rallies in the recent past, the world’s most- consumed cooking oil has struggled to break above the RM4,000-mark amid concerns over faltering demand and rising supplies in top growers Indonesia and Malaysia.
The market will now focus on exports and production in September, Bagani said. Shipments are likely to drop due to high reserves at key destination markets like India, while the slide in prices of sunflower and soybean oils could force palm to keep its discount intact in order to gain fresh buying, he added.