KUALA LUMPUR (July 10): Palm oil inventories in Malaysia fell to their lowest in 11 months at the end of June, the fourth month of declines, as imports and production outpaced exports, according to industry regulator data on Wednesday.
Benchmark palm oil prices fell 8% in the first half of 2019 because of high stockpiles and slow demand earlier. Falling stockpiles could support prices, which were last up 0.3% at RM1,948 (US$470.53) a tonne at the midday break.
End-stocks in June fell 0.97% to 2.42 million tonnes from May, data from the Malaysian Palm Oil Board (MPOB) showed. That is the lowest since July 2018. <MYPOMS-TPO>
A Reuters survey forecast palm oil’s stockpiles at the end of June to fall 4% to 2.35 million tonnes.
The MPOB data also showed that output also fell to 1.52 million tonnes, down 9.2% from May, and also the lowest since July last year.
That brings Malaysia’s production for the first half of the year to 9.79 million tonnes. This compares with output of 8.9 million tonnes in the first-half of 2018. For 2019, the Malaysian Palm Oil Board forecasts output of 20 million tonnes.
Malaysia’s June palm imports were 101,250 tonnes, versus a Reuters forecast of 61,951 tonnes.
“The higher-than-expected stock levels is due to imports. Indonesia’s palm oil has been cheaper compared with BMD (Bursa Malaysia Derivatives), so probably more refiners were bringing that in,” said a Kuala Lumpur based trader, adding that the decline in production was in line with expectations.
A Reuters poll had forecast June output to fall due to worker shortages during the Eid al-Fitr celebrations, which was in early June this year.
Plantation workers in Malaysia typically go on long leave then, lowering productivity and output at oil palm estates.
Meanwhile, exports in June fell for the first time in four months, down 19.35% from the previous month to 1.38 million tonnes, its lowest since February. <MYPOME-PO>
Traders told Reuters that exports had fallen due to slower buying in major markets like India.
“This is partly the stronger ringgit factor, but mainly stockpiles of vegetable oils in India are sufficient for now,” said a trader.
Palm oil futures are priced in Malaysian ringgit. A stronger ringgit usually makes the edible oil more expensive for foreign buyers. The ringgit appreciated 1.4% against the dollar in June.
In an earlier survey, June palm output was forecast to drop 8% to 1.54 million tonnes, while exports were expected to decline 19% to 1.39 million tonnes.
The following is a breakdown of the Malaysian Palm Oil Board figures and Reuters estimates for June:
| (volumes in tonnes) | ||||
| June 2019 | June 2019 poll | May 2019 | June 2018 | |
| Output | 1,518,239 | 1,538,000 | 1,671,467 | 1,332,704 |
| Stocks | 2,423,615 | 2,350,000 | 2,447,441 | 2,204,187 |
| Exports | 1,382,761 | 1,386,624 | 1,711,882 | 1,129,518 |
| Imports | 101,250 | 61,951 | 61,789 | 85,889 |
(US$1 = RM4.1400)
Source : The Edge Markets
