MARKET DEVELOPMENT
Malaysian Palm Inventories Increase to Highest in 18 Months
Malaysian Palm Inventories Increase to Highest in 18 Months
11/10/2014 (Bloomberg) - Palm oil stockpiles in Malaysia, the world’s top grower after Indonesia, climbed to the highest level since March 2013 as production fell less than predicted by analysts and traders.
Reserves rose 1.8 percent to 2.09 million metric tons in September from a month earlier, the Malaysian Palm Oil Board said today. That’s more than the 2.05 million tons median estimate in a Bloomberg survey published this week. While output slid 6.6 percent to 1.9 million tons, that was less than the 11 percent retreat predicted in the survey.
Palm, used in food and biofuels, lost 18 percent this year on swelling global supplies of cooking oils, including a record U.S. soybean harvest. Prices risk tumbling further as the most-used edible oil is no longer competitive against alternatives even after dropping to the lowest level since 2009, Dorab Mistry, director at Godrej International Ltd. said last month.
“Production was expected to be much lower,” Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Singapore Pte, said by phone from Mumbai. The increase in stockpiles and smaller drop in output “could lead to some profit-taking,” he said.
Futures slumped as much as 1.5 percent to 2,158 ringgit ($662) a ton on Bursa Malaysia Derivatives today before closing at 2,182 ringgit. The most-active contract touched 1,914 ringgit on Sept. 2, the lowest since March 2009. Soybean oil’s premium to palm has averaged about $89 a ton this year from $244 in 2013, data compiled by Bloomberg show.
Export Woes
Exports surged 13 percent to 1.63 million tons in September from a month earlier, board data showed. Shipments slumped 19 percent to 395,532 tons in the first 10 days of this month from the same period in September, surveyor Intertek said today.
“What’s more worrying is the export data for the first 10 days of this month,” Ivy Ng, an analyst at CIMB Investment Bank Bhd., said by phone in Kuala Lumpur. “This shows a decline, which suggests that the strong exports that we saw in the previous month may not be sustainable.”
Inventories may surge to 2.2 million tons by month end as Indian demand eases after the Diwali festival and duty-free Indonesian exports intensify the battle for buyers, Ng said. The decline in crude oil prices will further curb demand for palm as a biodiesel feedstock, she said.
Malaysia scrapped last month an export tax on crude palm oil for September and October to help boost shipments and curb stockpile expansion, while Indonesia cut duties on most shipments to zero this month. Malaysia will extend the tax exemption to December, Prime Minister Najib Razak said in his 2015 budget speech in Kuala Lumpur today.
“Today’s data is quite bearish in an overall context,” Ng said. “A drop in the crude oil price will reduce the viability of biodiesel.”
West Texas Intermediate extended its slump into a bear market amid speculation that rising global oil supplies will be more than enough to meet slowing demand. WTI for November delivery declined as much as $2.18 to $83.59 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.55 at 6:23 p.m. Singapore time. Brent for November delivery slid as much as 2.2 percent to $88.11 a barrel on ICE Futures Europe exchange, the lowest since December 2010.
Reserves rose 1.8 percent to 2.09 million metric tons in September from a month earlier, the Malaysian Palm Oil Board said today. That’s more than the 2.05 million tons median estimate in a Bloomberg survey published this week. While output slid 6.6 percent to 1.9 million tons, that was less than the 11 percent retreat predicted in the survey.
Palm, used in food and biofuels, lost 18 percent this year on swelling global supplies of cooking oils, including a record U.S. soybean harvest. Prices risk tumbling further as the most-used edible oil is no longer competitive against alternatives even after dropping to the lowest level since 2009, Dorab Mistry, director at Godrej International Ltd. said last month.
“Production was expected to be much lower,” Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Singapore Pte, said by phone from Mumbai. The increase in stockpiles and smaller drop in output “could lead to some profit-taking,” he said.
Futures slumped as much as 1.5 percent to 2,158 ringgit ($662) a ton on Bursa Malaysia Derivatives today before closing at 2,182 ringgit. The most-active contract touched 1,914 ringgit on Sept. 2, the lowest since March 2009. Soybean oil’s premium to palm has averaged about $89 a ton this year from $244 in 2013, data compiled by Bloomberg show.
Export Woes
Exports surged 13 percent to 1.63 million tons in September from a month earlier, board data showed. Shipments slumped 19 percent to 395,532 tons in the first 10 days of this month from the same period in September, surveyor Intertek said today.
“What’s more worrying is the export data for the first 10 days of this month,” Ivy Ng, an analyst at CIMB Investment Bank Bhd., said by phone in Kuala Lumpur. “This shows a decline, which suggests that the strong exports that we saw in the previous month may not be sustainable.”
Inventories may surge to 2.2 million tons by month end as Indian demand eases after the Diwali festival and duty-free Indonesian exports intensify the battle for buyers, Ng said. The decline in crude oil prices will further curb demand for palm as a biodiesel feedstock, she said.
Malaysia scrapped last month an export tax on crude palm oil for September and October to help boost shipments and curb stockpile expansion, while Indonesia cut duties on most shipments to zero this month. Malaysia will extend the tax exemption to December, Prime Minister Najib Razak said in his 2015 budget speech in Kuala Lumpur today.
“Today’s data is quite bearish in an overall context,” Ng said. “A drop in the crude oil price will reduce the viability of biodiesel.”
West Texas Intermediate extended its slump into a bear market amid speculation that rising global oil supplies will be more than enough to meet slowing demand. WTI for November delivery declined as much as $2.18 to $83.59 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.55 at 6:23 p.m. Singapore time. Brent for November delivery slid as much as 2.2 percent to $88.11 a barrel on ICE Futures Europe exchange, the lowest since December 2010.