Palm oil inventories in Malaysia climbed to an all-time high last month, as production of the world’s most-used cooking oil stayed near a record.
Stockpiles expanded 5.5 percent to 2.63 million tonnes from 2.49 million tonnes in August, data from the Malaysian Palm Oil Board showed yesterday. The median estimate in a Bloomberg survey last week was for reserves to jump to 2.7 million tonnes. Inventories at the end of last month surpassed the previous record in December 2012 by 910 tonnes.
Rising stockpiles may scuttle a bull market rally in palm oil futures as record supplies of global vegetable oils and a collapse in crude oil weaken demand for the tropical oil used in everything from cooking oil to soaps and cosmetics.
Palm oil rallied last month as the strongest El Nino in nearly two decades threatens dry spells across Southeast Asia, where most of the crop is grown. A weak ringgit also fueled palm’s rally as it made the ringgit-priced feedstock more attractive for offshore customers.
Exports rose 4.4 percent to 1.68 million tonnes last month, board data show, more than the 1.62 million tonnes forecast in the Bloomberg survey.
Robust demand from Indian buyers and the weaker ringgit may underpin palm prices, said Hiro Chai, associate director at CIMB Futures Sdn in Kuala Lumpur.
“Exports are bigger than expected mainly because of the good Indian appetite and at the same time, Indonesia’s September exports were also fantastic,” Chai said yesterday by telephone. “We’ve seen quite a substantial correction and prices have reached an attractive level where people will buy on the series of good data.”
Exports from Indonesia, the world’s largest producer, increased 11 percent to 2.34 million tonnes last month, the Indonesian Palm Oil Association said.
India’s palm oil imports probably rose for a ninth month, advancing 15 percent to 800,000 tonnes last month from a year earlier, a Bloomberg survey showed.
Output in Malaysia totaled 1.96 million tonnes last month, just below estimates for 2 million tonnes and near the record 2.05 million tonnes a month ago, signaling palm trees may have entered a resting period after the peak output. Oil palm trees are at their peak production period between July and October before gradually entering a low-yielding season.
The benchmark contract on Bursa Malaysia Derivatives was at 2,263 ringgit a tonne at 3:27pm in Kuala Lumpur. Futures may have formed a floor at about 2,200 ringgit for the rest of the year and may rally if the Malaysian currency and production weakens, Chai said.
Malaysia and Indonesia, which together account for about 86 percent of the world’s palm oil supply, has agreed to form a council for producing countries, in efforts to cushion prices and work together to strengthen the industry.
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