PALM oil fell from a record after a report showed inventories in Malaysia climbed more than expected to a five-month high and as soybeans and soybean oil took a breather from their blistering rally.

Stockpiles of palm oil in the world’s second-biggest grower increased 7.1% in April from a month earlier to 1.55 million tonnes, according to the Malaysian Palm Oil Board. While that’s more than the 1.5 million tonnes forecast in a Bloomberg survey, reserves are still 24% smaller than a year earlier.

Production rose 7% to 1.52 million tonnes, compared to an estimate for a 9.2% gain. That’s a much slower growth than the almost 30% jump in March, but it’s still the highest amount since October. Exports expanded more than expected, rising 13% to a four-month high of 1.34 million tonnes.

The board’s report was bearish with stockpiles above market estimates by around 4%-7% and domestic consumption significantly lower by 18% from a month earlier, according to Marcello Cultrera, an institutional sales manager and broker at Phillip Futures Sdn Bhd in Kuala Lumpur.

Futures sank as much as 3.3% yesterday in Kuala Lumpur before paring losses to close 1.4% lower. Palm oil powered to the highest ever close last Friday and capped its biggest weekly advance in two decades. Crop futures from corn to soybean oil also slipped yesterday after their scorching rally in recent weeks.

Looking forward, the market will be watching exports in May and the recovery in Malaysia’s production, Cultrera said. Shipments surged 37% in the first 10 days of May compared to a month earlier, according to AmSpec Agri.

While board data are bearish for sentiment, May 1-10 exports were really good compared to April, according to Anilkumar Bagani, research head of Mumbai-based Sunvin Group. Still, due to a rise in inventories and a recovery in the production cycle and a drop in soy oil, palm oil may correct lower from last Friday’s high on profit-taking and to attract fresh buying, he said.

Source : TheMalaysianReserve