The Edge Markets (11/11/2019) - KUALA LUMPUR (Nov 11): Palm oil inventories in Malaysia, the world's second-largest producer of the edible oil, resumed their downward path in October as output fell and the pace of exports quickened, pushing palm prices to a 22-month high.

October inventories dipped 4.1% to 2.3 million tonnes, their second lowest level this year after August's 2.25 million tonnes, according to data on Monday from the Malaysian Palm Oil Board (MPOB).

The fall in stocks buoyed benchmark palm oil prices, which were up RM33, or 1.3%, at RM2,606 (US$629.77) per tonne at the end of Monday's morning session. The benchmark price hit RM2,615 a tonne earlier in the day, its highest since January 2018.

Exports grew 16.4% to 1.6 million tonnes, rebounding from an 18.8% contraction in September.

"There's been a great deal of exports that moved into China, which has been seeing lower soyoil production so palm is the natural substitute," said a Kuala Lumpur-based trader. "They're also buying ahead of Chinese New Year."

Malaysia's output dipped to 1.80 million tonnes in October, missing analyst forecasts and down about 8% from a year earlier. The fall was tied to persistent dry weather and recent haze, which cut productivity, said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.

"The data is positive for palm oil prices as the production and stocks are down and Nov 1-10 palm oil export shows promising numbers."

The MPOB in September revised Malaysia's 2019 annual output slightly lower to 20 million tonnes from its initial forecast of 20.3 million tonnes, and said it expected inventories to fall to 2 million tonnes by December.

A Reuters survey had forecast palm oil stockpiles at the end of October to rise 2.8% to a seven-month high of 2.52 million tonnes. Production was seen gaining 2% to 1.88 million tonnes, and exports were seen up 13.1%, at 1.59 million tonnes.

The following is a breakdown of the Malaysian Palm Oil Board figures and Reuters estimates for October (volumes in tonnes):

                 Oct 2019     Oct 2019 poll     Sept 2019   Oct 2018

Output      1,795,880         1,879,282       1,842,433   1,964,954

Stocks      2,348,066         2,516,000       2,448,272    2,722,391

Exports     1,641,743        1,594,000       1,409,945    1,571,169

Imports          85,034             52,000            71,112        117,269

*indicates revised figures by the Malaysian Palm Oil Board

(US$1 = RM4.1380)

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