PETALING JAYA: Malaysia’s palm oil stocks in November stood at 1.934 million tonnes, reflecting only a marginal decrease from 1.974 million tonnes, the highest level year-to-date, recorded in October. Malaysian Palm Oil Board, in its monthly report yesterday, also showed production in November dropped 19.6% to 1.595 million tonnes compared with 1.984 million tonnes in October. Exports grew slightly to 1.499 million tonnes in November from 1.478 million tonnes a month earlier. It was speculated the high inventory was due to buyers adopting a “wait and see” stance on anticipation that crude palm oil (CPO) price would fall further. The three-month CPO futures yesterday closed RM5 down to RM2,521 per tonne, or 9.6% off the year-to-date highest of RM2,789 on May 13. It was also said that CPO price traded firmer on fears of lower production due to the rainy season. According to a recent Reuters report, although output was still high, it was falling at a rapid pace. “Production is falling from the record high in October because it has been hard to transport oil palm out of the estates to the refineries due to heavy rain and floods,” said the news agency. Interband Group senior trader Jim Teh told StarBiz he expected the CPO price to go down further by year-end to around RM2,300 per tonne due to the “over-stocking.” “International buyers are not buying in bulk; they order CPO as and when needed. This is because they are comforted by the heavy stockpile. They are also waiting for the prices to fall further,” he said, adding that the current CPO price was considered expensive. Teh said relative to production cost, the “ideal” price for CPO should be at around RM2,300 per tonne.
“Average production cost is around RM1,100 to RM1,500 per tonne,” he said. Teh said if CPO price stayed at the current level, the commodity could lose its competitiveness to soy oil. “Rather than relying on futures derivatives, CPO price should be determined by market supply and demand as it is more practical,” he said. Source: The Star by Sharidan M. Ali