Palm Oil Inventories Seen Dropping

Palm oil stockpiles in Malaysia, the world’s second-biggest supplier, probably declined for the first time in four months as production tumbled the most since February, a Bloomberg survey showed.

Inventories fell three per cent to 1.92 million metric tonnes in December from a month earlier, according to the median of seven estimates from plantation companies, analysts and traders. That would be the first drop since August and 27 per cent less than a year earlier, according to the Malaysian Palm Oil Board. Output fell 10 per cent to 1.67 million tonnes from a month earlier and was 6.2 per cent below December 2012, the survey showed. The board publishes the data on January 10.

Palm oil, used in everything from candy to biofuel, posted its first advance since 2010 last year on speculation that output from Indonesia, the largest producer, may drop for the first time since 1998. Less supply and increasing use in biodiesel will probably keep prices between RM2,600 to RM2,900 a tonne on the Bursa Malaysia Derivatives in Kuala Lumpur, according to Dorab Mistry, director at Godrej International Ltd. Futures traded at RM2,589 today.

“We’re expecting only a mild drop in inventories on the back of lower production and some domestic disappearance for general consumption or for biodiesel production,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd. “The drop in stockpiles should continue as production should be lower on a year-on-year basis,” she said in a phone interview last week.

Futures climbed 9.1 per cent in Kuala Lumpur last year after slumping a combined 36 per cent in the past two years. The contract for March delivery fell 0.6 per cent to RM2,589 by the mid-day break today. Prices will continue to trade between RM2,500 and RM2,800 in the next couple of months given the gradual drop in stockpiles, said Tan.

Inventories in Malaysia remained below 2 million tonnes from April after reaching a record 2.63 million tonnes in December 2012, board data show.

Exports fell 2.6 per cent to 1.48 million tonnes from a month earlier and were 10 per cent below a year ago, the survey showed. Shipments slid 1.1 per cent to 1.43 million tonnes in December from a month earlier, according to Intertek. They dropped 3.3 per cent to 1.42 million tonnes, SGS (Malaysia) Sdn Bhd estimates.

Imports were 20,000 tonnes last month, 33 per cent more than November and 78 per cent less than a year earlier, according to the median of five estimates.– Bloomberg

Source :  Business Times

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