KUALA LUMPUR: Palm oil stockpiles in Malaysia, the world’s second-largest producer, contracted for a second month in February as production declined more than expected to a two-year low, according to official data.
Inventories shrank 5.2% to 2.44 million tonnes, the Malaysian Palm Oil Board said yesterday, matching the median estimate in a Bloomberg survey published March 5 and 18% higher than a year ago. Output fell 19% to 1.3 million tonnes, the lowest level since February 2011 and more than the 13% drop estimated in the survey. Exports retreated 14% to 1.4 million tonnes, according to data from the board.
Prices in Kuala Lumpur have dropped 26% over the past year as stockpiles remain near record levels on rising global oilseed supplies and slowing demand.
A bear market in palm was poised to deepen in 2013 as the most-used cooking oil slumped to less than RM2,000 a tonne on increased global supplies of vegetable oils, Dorab Mistry, director at Godrej International Ltd, said on March 6.
The drop in production would be “near-term positive” for prices, said Gnanasekar Thiagarajan, director at Mumbai-based Commtrendz Risk Management Services Pvt. Output may continue to be at these levels this month, he said.
Palm oil for May delivery closed unchanged at RM2,448 a tonne on the Malaysia Derivatives Exchange at the midday break, before the release of the data. Futures earlier climbed as much as 0.5% to RM2,461, the highest level for the most active contract since Feb 26. January and February are usually the lowest production months in the year. Malaysia may produce 19.5 million tonnes to 19.7 million tonnes this year, according to Mistry.
That is more than the 18.9 million tonnes forecast by the Malaysian Palm Oil Board and higher than last year’s output of 18.8 million tonnes.
“Demand is going to be incrementally less, and supply will be incrementally higher” this year, said Gnanasekar.
Malaysia said in October it would cut the export tax to between 4.5% and 8.5%, from about 23% from Jan 1, to clear out the reserves. The tariff for March was 4.5% after being set at zero in January and February as the base price was below the threshold that triggers the minimum rate. Indonesia, the biggest grower, fixed the duty at 10.5% this month.
In the first 10 days of this month, exports from Malaysia were little changed at 441,025 tonnes from 440,830 tonnes in the same period of February, Intertek said yesterday. – Bloomberg
Source : The Star