MARKET DEVELOPMENT
PREVIEW-Malaysian Oct Palm Stocks Seen Higher, Lower Output Caps Rise
PREVIEW-Malaysian Oct Palm Stocks Seen Higher, Lower Output Caps Rise
07/11/2013 (Reuters) - Malaysian palm oil stocks probably rose again in October, a Reuters survey showed, although the increase was limited because seasonal factors helping output began to fade and monsoon rains dented production.
Malaysia and Indonesia, which together account for about 90 percent of the world's palm oil supply, have begun to see smaller yields as wet weather has complicated harvesting.
Production normally peaks in October but could have tapered off this year instead. The survey showed output probably fell 3.3 percent from September to 1.85 million tonnes, which would be the first drop in eight months.
In late October Malaysia's meteorological department issued warnings of thunderstorms and heavy rain over most of the Southeast Asian country, including major palm oil producing states of Sabah, Johor and Pahang.
Floods may have disrupted palm oil harvesting and hampered the transportation of fresh fruit bunches to mills.
The forecast weakness in output in October would help reduce the impact on stocks of a slight lull in exports, traders said.
Inventories may only see a small 2.2 percent increase to 1.82 million tonnes from September's 1.78 million.
Exports of Malaysian palm oil probably edged down 0.3 percent from a month before to 1.60 million tonnes, according to the survey.
Despite the wet conditions on plantations, some planters say production might not see a steep drop unless the weather worsens suddenly.
"The weather problem is the talk of the town but it's natural that it starts raining at this time of the year," an
official at a plantation firm said.
"There's no doubt that rains have come in quite a lot at the moment. But if it doesn't turn much worse, then I don't think it will impact production too much."
LOCAL CONSUMPTION
The median figure from respondents implied domestic consumption in October of around 225,000 tonnes. Consumption generally ranges from 150,000 to 180,000 tonnes.
Malaysian imports of palm oil products likely rose to 20,000 tonnes in October from 19,483 tonnes in September.
FACTORS TO WATCH
Expectations of lower output and tighter supplies lifted the Bursa Malaysia Derivatives Exchange's palm oil benchmark futures 11.8 percent in October, the biggest rise in three years.
Earlier estimates had suggested that Malaysian crude palm oil production would hit a record high of more than 19 million tonnes this year compared to 18.79 million in 2012.
Data from the Malaysian Palm Oil Board showed production from January-September was only a tad higher at 13.7 million tonnes than the 13.2 million in the same period last year.
But despite poorer yields and disrupted harvesting, inventories might not drop much as export demand dwindles towards the end of the year, traders and planters said.
"From now onwards, the incoming fruit will be lower, and the rain might also disrupt harvesting. But because exports are flattish, it won't bring down stocks that much," said a trader with a foreign commodities brokerage.
Exports of palm oil traditionally slow in the last quarter of the year as cold winter temperatures solidify the tropical oil and make it less appealing to buyers.
An ambitious government plan to raise Malaysia's biodiesel requirement to 7 percent palm oil, up from 5 percent, will see tighter stockpiles from next year if the policy is successfully implemented nationwide.
Industry and government officials said the "B7" biodiesel blend could be mandatory from December as talks with interested parties were nearing a conclusion.
Indonesia will keep its export tax for crude palm oil at 9 percent for November, while Malaysia has decided to keep its export duty at 4.5 percent, unchanged since March.
Breakdown of October estimates (in tonnes):
Range Median*
Production 1,800,000 - 1,950,482 1,850,000
Exports 1,573,105 - 1,650,000 1,600,000
Imports 19,000 - 25,000 20,000
Closing stocks 1,730,000 - 1,830,000 1,820,085
* Official stocks of 1,781,397 tonnes for September, plus the above estimated output and imports give a total October supply of 3,651,397 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in October would be 231,312 tonnes.
Malaysia and Indonesia, which together account for about 90 percent of the world's palm oil supply, have begun to see smaller yields as wet weather has complicated harvesting.
Production normally peaks in October but could have tapered off this year instead. The survey showed output probably fell 3.3 percent from September to 1.85 million tonnes, which would be the first drop in eight months.
In late October Malaysia's meteorological department issued warnings of thunderstorms and heavy rain over most of the Southeast Asian country, including major palm oil producing states of Sabah, Johor and Pahang.
Floods may have disrupted palm oil harvesting and hampered the transportation of fresh fruit bunches to mills.
The forecast weakness in output in October would help reduce the impact on stocks of a slight lull in exports, traders said.
Inventories may only see a small 2.2 percent increase to 1.82 million tonnes from September's 1.78 million.
Exports of Malaysian palm oil probably edged down 0.3 percent from a month before to 1.60 million tonnes, according to the survey.
Despite the wet conditions on plantations, some planters say production might not see a steep drop unless the weather worsens suddenly.
"The weather problem is the talk of the town but it's natural that it starts raining at this time of the year," an
official at a plantation firm said.
"There's no doubt that rains have come in quite a lot at the moment. But if it doesn't turn much worse, then I don't think it will impact production too much."
LOCAL CONSUMPTION
The median figure from respondents implied domestic consumption in October of around 225,000 tonnes. Consumption generally ranges from 150,000 to 180,000 tonnes.
Malaysian imports of palm oil products likely rose to 20,000 tonnes in October from 19,483 tonnes in September.
FACTORS TO WATCH
Expectations of lower output and tighter supplies lifted the Bursa Malaysia Derivatives Exchange's palm oil benchmark futures 11.8 percent in October, the biggest rise in three years.
Earlier estimates had suggested that Malaysian crude palm oil production would hit a record high of more than 19 million tonnes this year compared to 18.79 million in 2012.
Data from the Malaysian Palm Oil Board showed production from January-September was only a tad higher at 13.7 million tonnes than the 13.2 million in the same period last year.
But despite poorer yields and disrupted harvesting, inventories might not drop much as export demand dwindles towards the end of the year, traders and planters said.
"From now onwards, the incoming fruit will be lower, and the rain might also disrupt harvesting. But because exports are flattish, it won't bring down stocks that much," said a trader with a foreign commodities brokerage.
Exports of palm oil traditionally slow in the last quarter of the year as cold winter temperatures solidify the tropical oil and make it less appealing to buyers.
An ambitious government plan to raise Malaysia's biodiesel requirement to 7 percent palm oil, up from 5 percent, will see tighter stockpiles from next year if the policy is successfully implemented nationwide.
Industry and government officials said the "B7" biodiesel blend could be mandatory from December as talks with interested parties were nearing a conclusion.
Indonesia will keep its export tax for crude palm oil at 9 percent for November, while Malaysia has decided to keep its export duty at 4.5 percent, unchanged since March.
Breakdown of October estimates (in tonnes):
Range Median*
Production 1,800,000 - 1,950,482 1,850,000
Exports 1,573,105 - 1,650,000 1,600,000
Imports 19,000 - 25,000 20,000
Closing stocks 1,730,000 - 1,830,000 1,820,085
* Official stocks of 1,781,397 tonnes for September, plus the above estimated output and imports give a total October supply of 3,651,397 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in October would be 231,312 tonnes.