Malaysian palm oil stocks in August climbed 7.3 per cent to a six-month high as exports returned to normal after sharply rising on festival demand a month earlier, a Reuters poll showed today.
Reserves in the world’s No. 2 palm oil producer rose to 1.43 million tonnes in August, the highest since February and just above the 1.4 million requirement needed for the refinery industry to function as output also registered a slight growth.
A poll of five planters showed output rose 2.7 per cent to 1.53 million tonnes, the highest so far in 2009, as estates rushed to extract palm oil before the month-long Muslim dawn-to-dusk fasting observance of Ramadan that began end-August.
“Initially the talk was about lower stocks but plantations have been working round the clock to get their Indonesian workers to harvest the palm oil before they take leave for Ramadan,” said one poll contributor.
“El Nino is a factor but there have been some good rains from end-August onwards, so production should slowly pick up.”
Rains weakened in key oil palm growing regions in Malaysia thanks to El Nino weather condition in August, although recovery may be on the cards from September onwards, the head of country’s meteorology department said last week.
But other poll respondents said dry weather in the past few months could still worsen yields down the line as fewer oil-rich palm flowers developed and tree stress was ongoing in top palm oil producing region of Sabah on Borneo Island as a result.
Shipments slowed down 8 per cent in August from a sharp jump a month earlier as Middle Eastern and Pakistani buyers finished buying for Ramadan where elaborate meals are cooked for the breaking of fast, traders said.
“The price-sensitive Chinese and Indian buyers were waiting for the market to ease in August after the heavy purchases by the Muslim countries, so there was a bit of a slowdown,” said another respondent to the poll.
“We should see normal festival demand till October on account of Chinese and Indian holidays but really, July’s 1.45 million tonnes was exceptional,” he said.
The poll pegged palm oil shipments in August at 1.33 million tonnes.
Stocks, as a result, normalised and climbed higher on the pullback in exports, although higher crude palm oil imports from rival and top producer Indonesia gave an additional boost as purchases there were much cheaper, many contributors said.
“The idea is to buy Indonesia and sell from Malaysia at a higher price. It was a bit overdone but it puts the stocks at a comfortable level,” said a plantation official.
Malaysia likely imported 80,000 tonnes from Indonesia last month, the poll showed.
Industry regulator Malaysian Palm Oil Board (MPOB) will issue August palm oil stocks, production and exports on Thursday. — Reuters Source : Business Times