MARKET DEVELOPMENT
UPDATE 1-Malaysia End-Oct Palm Stocks Climb, But Monsoon to Curb Supply
UPDATE 1-Malaysia End-Oct Palm Stocks Climb, But Monsoon to Curb Supply
12/11/2013 (Reuters) - Malaysia's palm oil stocks rose a bigger-than-expected 3.5 percent in October to a six-month high despite wet weather, industry data showed on Monday, although seasonal monsoon rains could tighten supplies in the months ahead.
Heavy rains at the end of October had fueled concerns that harvesting of fresh fruit could have been disrupted and lead to tighter supplies, helping benchmark prices post their biggest weekly gain in more than four years.
But data released by the Malaysian Palm Oil Board showed that output had inched up to 1.97 million tonnes in October against a 3.3 percent drop forecast in a Reuters poll of traders and plantation firms. Production was 1.91 million tonnes in September.
Exports of Malaysian palm oil products fared better than in September. The report by the industry regulator showed that exports rose 3.3 percent to 1.66 million tonnes, slightly above forecasts for 1.60 million tonnes of shipments.
That brought inventories in Malaysia, the world's second-largest producer, up 3.5 percent from a month ago to 1.85 million tonnes, the highest since April. The rise was above market estimates for end-stocks to inch up to 1.82 million tonnes, but investors say stocks are still within expectations.
"We don't see anything particularly bearish with the numbers. The stocks rise has already been penciled in and I think 2,500-2,510 ringgit is already the bottom for the time being," said a trader with a local commodities brokerage.
Ahead of the report's release, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had climbed 1.4 percent to 2,542 ringgit ($794) per tonne by Monday's midday break, snapping four straight days of losses.
"Going forward, the market looks neutral to bullish. Production will taper off November onwards," the trader added.
Output in Malaysia and Indonesia, which together account for almost all of the world's palm oil supply, have begun to weaken and would likely fall further as monsoon rains become heavier heading into the end of the year.
Heavy rains and thunderstorms could trigger flooding in major palm oil producing states, including Sabah and Johor, in Malaysia.
But inventories will unlikely see a sharp decline as winter dampens export demand. The tropical oil solidifies in cold temperatures.
Cargo surveyor data released earlier on Monday showed exports in Nov. 1-10 fell 13 percent to 472,321 tonnes, compared with the same period in a month ago, as shipments to the world's biggest buyer India plummeted.
Traders expect demand to trickle in from China, the world's second-largest palm oil buyer after India, as buyers re-stock ahead of the Lunar New year festival celebrated at the end of January.
A U.S. plan to impose a ban on artificial trans fats in processed foods ranging from cookies to frozen pizza could shift demand to palm oil as food manufacturers look for alternatives to using hydrogenated soyoil.
"The trans fat ban in the U.S. will be supportive for palm oil in the long run. We don't know yet how big the impact will be, but it is definitely positive news for palm," the Kuala Lumpur-based trader added.
For a breakdown of Malaysian Palm Oil Board figures and Reuters estimates for September, click ($1=3.20 ringgit)
Heavy rains at the end of October had fueled concerns that harvesting of fresh fruit could have been disrupted and lead to tighter supplies, helping benchmark prices post their biggest weekly gain in more than four years.
But data released by the Malaysian Palm Oil Board showed that output had inched up to 1.97 million tonnes in October against a 3.3 percent drop forecast in a Reuters poll of traders and plantation firms. Production was 1.91 million tonnes in September.
Exports of Malaysian palm oil products fared better than in September. The report by the industry regulator showed that exports rose 3.3 percent to 1.66 million tonnes, slightly above forecasts for 1.60 million tonnes of shipments.
That brought inventories in Malaysia, the world's second-largest producer, up 3.5 percent from a month ago to 1.85 million tonnes, the highest since April. The rise was above market estimates for end-stocks to inch up to 1.82 million tonnes, but investors say stocks are still within expectations.
"We don't see anything particularly bearish with the numbers. The stocks rise has already been penciled in and I think 2,500-2,510 ringgit is already the bottom for the time being," said a trader with a local commodities brokerage.
Ahead of the report's release, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had climbed 1.4 percent to 2,542 ringgit ($794) per tonne by Monday's midday break, snapping four straight days of losses.
"Going forward, the market looks neutral to bullish. Production will taper off November onwards," the trader added.
Output in Malaysia and Indonesia, which together account for almost all of the world's palm oil supply, have begun to weaken and would likely fall further as monsoon rains become heavier heading into the end of the year.
Heavy rains and thunderstorms could trigger flooding in major palm oil producing states, including Sabah and Johor, in Malaysia.
But inventories will unlikely see a sharp decline as winter dampens export demand. The tropical oil solidifies in cold temperatures.
Cargo surveyor data released earlier on Monday showed exports in Nov. 1-10 fell 13 percent to 472,321 tonnes, compared with the same period in a month ago, as shipments to the world's biggest buyer India plummeted.
Traders expect demand to trickle in from China, the world's second-largest palm oil buyer after India, as buyers re-stock ahead of the Lunar New year festival celebrated at the end of January.
A U.S. plan to impose a ban on artificial trans fats in processed foods ranging from cookies to frozen pizza could shift demand to palm oil as food manufacturers look for alternatives to using hydrogenated soyoil.
"The trans fat ban in the U.S. will be supportive for palm oil in the long run. We don't know yet how big the impact will be, but it is definitely positive news for palm," the Kuala Lumpur-based trader added.
For a breakdown of Malaysian Palm Oil Board figures and Reuters estimates for September, click ($1=3.20 ringgit)