MARKET DEVELOPMENT
Malaysia’s Palm Reserves Extend Climb
Malaysia’s Palm Reserves Extend Climb
08/07/2014 (Business Times) – Palm oil stockpiles in Malaysia, the biggest supplier after Indonesia, probably climbed for a fourth month as output rose to the highest level for June since 2011.
Reserves increased to 1.86 million metric tonnes from 1.84 million tonnes in May and 1.65 million tonnes a year earlier, according to the median of seven estimates from planters, analysts and traders compiled by Bloomberg. Production was 1.66 million tonnes, the survey showed. That’s the highest for June since 1.75 million tonnes three years ago, according to the Palm Oil Board. The board releases the data on July 10.
Futures tumbled 17 per cent since reaching an 18-month high in March as production expanded and demand in food and biofuel trailed estimates. Record US output of soybeans, crushed to make an alternative oil, is adding to global cooking oil supply this year. Retreating prices may extend a third monthly decline in global food costs as measured by the United Nations.
“Exports this year are quite bad and production seems to be very good in the first half, so the market is reflecting those fundamentals,” said David Ng, a Kuala Lumpur-based derivatives specialist at Phillip Futures Sdn Bhd. “As long as inventory remains below the 2 million-tonne mark, we still can see a bit of support for the market.”
Futures rose 0.3 per cent to RM2,409 (US$756) a tonne on the Bursa Malaysia Derivatives in Kuala Lumpur by 10.54am local time. Prices tumbled to an eight-month low of RM2,362 on June 12 after reaching RM2,916 on March 11, the highest level since September 2012.
Shipments from Malaysia fell 8.5 percent to 8.1 million tonnes in the first half, while output increased 9.1 percent to 9.15 million tonnes, according to Bloomberg calculations based on board data and the survey estimates. In June, exports rose 3.2 per cent from the previous month to 1.45 million tonnes, the highest since December, the survey showed. Shipments climbed 5.8 per cent to 1.39 million tonnes, surveyor Intertek said.
Production may be unchanged or slightly lower this month as plantation workers tend to be less productive in the fasting month of Ramadan and many take leave for the Eid celebration, Ivy Ng, an analyst at CIMB Investment Bank Bhd, said by phone.
Palm oil may trade between RM2,350 and RM2,600 this month depending on the progress of soybean planting in the US and crude oil prices, she said.
About 84.8 million acres will be sown with soybeans, the most ever and up 11 per cent from last year, the US Department of Agriculture said on June 30. Soybean futures slumped to the lowest since December 2011 this month. Crude oil rose in June as violence in Iraq escalated, boosting demand for biofuels.
Palm may rally less than earlier forecast as demand misses estimates and an El Nino starts later than expected, according to Dorab Mistry, director at Godrej International Ltd. Futures may climb to RM2,800 by December if the weather event occurs from mid-August, Mistry said on June 26, cutting his March 5 forecast for a run-up to as much as RM3,500.
Weaker production may be seen in Malaysia in the fourth quarter due to a prolonged dry spell in the first three months of the year, according to Rabobank International. Parts of some growing areas in Malaysia and Indonesia got less than 50 millimeters (2 inches) of rain in January and February, the driest spell since 1997, according to MDA Weather Services.
Demand may remain weak as top buyers India and China opt for more soybean oil as the spread between the two edible oils narrows, said Ng of Phillip Futures. The spread was about US$98 on July 4 compared with an average of US$244 in 2013, data compiled by Bloomberg show.-- Bloomberg
Reserves increased to 1.86 million metric tonnes from 1.84 million tonnes in May and 1.65 million tonnes a year earlier, according to the median of seven estimates from planters, analysts and traders compiled by Bloomberg. Production was 1.66 million tonnes, the survey showed. That’s the highest for June since 1.75 million tonnes three years ago, according to the Palm Oil Board. The board releases the data on July 10.
Futures tumbled 17 per cent since reaching an 18-month high in March as production expanded and demand in food and biofuel trailed estimates. Record US output of soybeans, crushed to make an alternative oil, is adding to global cooking oil supply this year. Retreating prices may extend a third monthly decline in global food costs as measured by the United Nations.
“Exports this year are quite bad and production seems to be very good in the first half, so the market is reflecting those fundamentals,” said David Ng, a Kuala Lumpur-based derivatives specialist at Phillip Futures Sdn Bhd. “As long as inventory remains below the 2 million-tonne mark, we still can see a bit of support for the market.”
Futures rose 0.3 per cent to RM2,409 (US$756) a tonne on the Bursa Malaysia Derivatives in Kuala Lumpur by 10.54am local time. Prices tumbled to an eight-month low of RM2,362 on June 12 after reaching RM2,916 on March 11, the highest level since September 2012.
Shipments from Malaysia fell 8.5 percent to 8.1 million tonnes in the first half, while output increased 9.1 percent to 9.15 million tonnes, according to Bloomberg calculations based on board data and the survey estimates. In June, exports rose 3.2 per cent from the previous month to 1.45 million tonnes, the highest since December, the survey showed. Shipments climbed 5.8 per cent to 1.39 million tonnes, surveyor Intertek said.
Production may be unchanged or slightly lower this month as plantation workers tend to be less productive in the fasting month of Ramadan and many take leave for the Eid celebration, Ivy Ng, an analyst at CIMB Investment Bank Bhd, said by phone.
Palm oil may trade between RM2,350 and RM2,600 this month depending on the progress of soybean planting in the US and crude oil prices, she said.
About 84.8 million acres will be sown with soybeans, the most ever and up 11 per cent from last year, the US Department of Agriculture said on June 30. Soybean futures slumped to the lowest since December 2011 this month. Crude oil rose in June as violence in Iraq escalated, boosting demand for biofuels.
Palm may rally less than earlier forecast as demand misses estimates and an El Nino starts later than expected, according to Dorab Mistry, director at Godrej International Ltd. Futures may climb to RM2,800 by December if the weather event occurs from mid-August, Mistry said on June 26, cutting his March 5 forecast for a run-up to as much as RM3,500.
Weaker production may be seen in Malaysia in the fourth quarter due to a prolonged dry spell in the first three months of the year, according to Rabobank International. Parts of some growing areas in Malaysia and Indonesia got less than 50 millimeters (2 inches) of rain in January and February, the driest spell since 1997, according to MDA Weather Services.
Demand may remain weak as top buyers India and China opt for more soybean oil as the spread between the two edible oils narrows, said Ng of Phillip Futures. The spread was about US$98 on July 4 compared with an average of US$244 in 2013, data compiled by Bloomberg show.-- Bloomberg