13/04/2010 (The Star Online), Petaling Jaya - The decline in palm oil stocks in March does not come as a surprise as it is approaching the typically “low stock season” from April to May.

According to the Malaysian Palm Oil Board’s monthly statistics, palm oil stocks declined 7.5% to 1.65 million tonnes in March month-on-month.

Exports for the month under review, however, increased by 7.65% to 1.4 million tonnes while crude palm oil (CPO) production swelled by 19.9% to 1.4 million tonnes.

 OSK Research’s Alvin Tai said palm oil stocks usually bottomed out in April to May and that stocks were expected to stay flat or drop further this month.

“Production in March is still relatively low coming out of February’s trough,” he told StarBiz.

CPO production in February fell 12.45% to 1.2 million tonnes month-on-month.

March released palm oil figures were also in line with palm oil experts and independent cargo surveyors’ forecast for Malaysia’s stocks and exports.

LMC International Ltd chairman Dr James Fry said about two weeks ago that the CPO price was expected to increase marginally in the next six months due to the seasonal factor that stocks would fall as demand picked up.

Palm oil stocks had been on the decline from the record level of 2.24 million tonnes late last year to about 2.23 million tonnes in January and two million tonnes in February.

Fry forecast the CPO price would fluctuate at between RM2,400 and RM2,600 this year.

In mid-March, Intertek data showed palm oil exports climbed 25% in the first 10 days of March compared with the same period in February.

CPO for July delivery at 6.20pm yesterday was at RM2,535 per tonne, down RM59.

Other developments that might have significant impact on the country’s CPO demand would be China’s difficulties or suspension in approving permits to import soyoil from Argentina, as a trade rift widened between the biggest buyer and largest supplier of the commodity, according to Bloomberg on April 11.

This lull of soyoil may create new demand for other vegetable oils, such as CPO, from China as a replacement.