Palm oil stockpiles in Malaysia probably fell the most in more than two years in March as exports from the world’s second-largest producer increased for the first time in five months.
Inventories declined 7 per cent to 2.27 million metric tonnes from February, the steepest monthly drop since January 2011, the median of estimates from two plantation companies and four analysts showed.
Output gained 2.3 per cent to 1.33 million tonnes, while exports rose 2.1 per cent to 1.43 million, the survey showed. Official data are due for release on April 10.
A decline in inventories for a third month may help stem a 33 per cent slump in prices in the past year of the commodity used in everything from biofuels to candy to noodles. Futures may climb through May, trading between RM2,400 and RM2,700 a tonne as Malaysis’a currency weakens before elections and inventories drop in Indonesia and Malaysia, the top producers, Dorab Mistry, a director at Godrej International Ltd, said on March 22.
The fall in stockpiles “should be positive for prices,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd. “The decline in stockpiles could be mild because the exports numbers have not turned out to be very strong. So it will just be mild decreases over the next few months.”
The contract for delivery in June advanced as much as 1.3 per cent to RM2,390 ringgit a tonne on the Bursa Malaysia Derivatives, before trading at RM2,384 at 10:52am in Kuala Lumpur.
Exports may gain for the first time since October and will be 7.5 per cent more than a year ago, according to the survey. Shipments rose 5.5 per cent to 1.37 million tonnes last month from February, according to Societe Generale de Surveillance.
Palm oil’s use is poised to rise at an above-average pace in the six months through September on a price discount to other oils and fats amid expected record production, Oil World said on April 2.
Global production is forecast to climb 7 per cent to 55.7 million tonnes in 2012-2013, the Hamburg-based researcher said. That compares with reduced availability for alternative oils in the six months ended last month, it said.
Palm’s discount to soybean oil was at US$307.21 a tonne today, higher than the five-year average of about US$186, according to data compiled by Bloomberg. Palm and soybean oils are substitutes in food and fuel.
Global stockpiles will gain to a record 7.385 million tonnes this season, according to a projection from the US Department of Agriculture. All-time high world production of 53.8 million tonnes will outpace demand of 52.4 million tonnes, the agency forecasts.
A bear market is set to deepen after August as futures drop below RM2,000 once the low output season is over, according to Mistry. Output is typically lowest in the first two months of the year though it’s produced through the year.
Production probably climbed 9.9 per cent in March from a year earlier, according to Bloomberg calculations based on the survey and data from the Malaysian Palm Oil Board.– Bloomberg
Source : Business Times