Palm Oil Stockpiles in Malaysia Surge 23%, More Than Expected, in August

Palm oil stockpiles in Malaysia, the world’s second-largest producer, jumped a more-than-expected 23 percent in August, the first monthly advance this year, after exports slumped and production increased. 

Inventories climbed to 1,723,262 metric tons from 1,405,740 tons in July, the Malaysian Palm Oil Board said in a statement today. That was the first increase since December, board data show. Output rose 5.7 percent to 1,605,662 tons, the fourth monthly gain, while exports tumbled 18 percent to 1,211,326 tons, dropping for the first time in four months. 

“The inventory level is bigger than most market analysts were expecting,” said Govindlal G. Patel, director of Dipak Enterprise, a trader of vegetable oils, by phone from Rajkot in India. “This may a trigger a correction in palm oil prices.” 

November-delivery futures fell as much as 0.5 percent to 2,629 ringgit ($845) a ton on the Malaysia Derivatives Exchange today and ended the morning session at 2,647 ringgit. Prices may decline to as low as 2,575 ringgit a ton in the next two sessions, Patel said. 

Exports from Malaysia increased 5.4 percent in the first 15 days of September to 653,077 tons from 619,425 tons in the same period in August, Intertek said in an e-mail today.

Production may climb by 5 percent this month, adding to stockpiles, Patel said. 

A drawdown in inventory in Indonesia, the biggest producer, because of higher exports in August may support prices, he said. Buyers of the tropical oil from Indonesia boosted purchases in August before the nation doubled the export tax to 6 percent in September, he said. 

Vegetable oil imports by India, the top user after China, reached a record last month after traders built inventories to meet festival demand. Shipments surged 64 percent to 1.07 million tons from 650,603 tons a year earlier, the Solvent Extractors’ Association of India said yesterday by e-mail. 

Palm oil has rebounded 17 percent since dropping to the lowest level in almost eight months on July 7, on speculation that demand will increase in Asian nations and harvesting in Malaysia and Indonesia will be disrupted in November and December should La Nina cause flooding in growing areas.Source: Bloomberg