Palm oil stockpiles in Indonesia probably slumped last month by the most since February 2013 as a dry spell reduced output in the world’s largest supplier.
Inventories dropped 12 per cent from August to 2.2 million metric tonnes, according to the median of six estimates from planters, traders, analysts and refiners compiled by Bloomberg. Production fell 9.8 per cent to 2.3 million tonnes, the biggest decline this year, the median of five estimates shows.
Futures plunged 20 per cent this year on swelling global supplies of cooking oils, including a record US soybean harvest.
That spurred Indonesia and Malaysia, which is the second-largest producer, to waive export duties. Dry conditions last month will worsen the impact on yields from a drought in the first quarter, according to PT Mandiri Sekuritas.
“The effect from the drought at the start of the year has begun to materialize,” said Hariyanto Wijaya, a Jakarta-based analyst at Mandiri Sekuritas.
“The first-quarter dryness, coupled with very dry conditions in September, have really hurt output. Production may have peaked,” he said by phone Oct 17.
The Indonesian Palm Oil Association may release export data this week. The percentage changes for output and reserves are based on previous surveys.
Malaysia scrapped the export tax for two months in September and will extend the waiver until December, Prime Minister Datuk Seri Najib Tun Razak said Oct 10. Reserves in the country expanded last month to the highest since March 2013, palm oil board data show.
Exports from Indonesia fell to 1.7 million tonnes in September from 1.72 million a month earlier, according to the median of six estimates in the Bloomberg survey.
Shipments declined as some exporters deferred sales to October to benefit from the zero tax rate, said Joelianto, trading director at PT Sinar Mas Agro Resources & Technology.
Indonesia cut the levy from 9 per cent in September. The country sets the monthly export tariff according to a formula based on average prices in Jakarta, Rotterdam and Kuala Lumpur. Crude shipments attract no tax if the average is US$750 or less.
“Over the past month, rainfall has been well below normal across southern Sumatra and most of Kalimantan,” Kyle Tapley, meteorologist at MDA Weather Services, said in an e-mail on Oct 17.
“Rains are expected to increase across Kalimantan over the next couple of weeks.
Drier than normal weather should continue in southern Sumatra, however, which will maintain significant dryness and stress on palm growth.”
Forest fires in Sumatra also disrupted field work in the main producing areas last month, said Sahat Sinaga, executive director of the Indonesian Vegetable Oil Industry Association.
Haze from the fires delayed flights to and from Sumatra as pollution neared levels considered dangerous to health. — Bloomberg
Source : The Borneo Post
