KUALA LUMPUR: Malaysia’s February palm oil exports likely fell to the lowest in a year because of slowing demand from India and China, the two largest single country palm oil buyers, a Reuters poll showed.
Shipments from the world’s second-biggest producer are expected to drop 14 percent from January to 1.21 million tons, its lowest since February last year, when exports dropped below 1 million tonnes, according to a Reuters survey of nine planters, traders and analysts.
Demand for palm oil declines during the northern hemisphere winter as the tropical oil solidifies in cold temperatures, making competing oils such as soy oil more attractive then.
“Exports to China during March will not see much changes, however we expect more shipments to China in April as the weather will be getting hotter then,” said a trader from East Malaysia, adding that this could support palm prices.
Palm oil inventories fell to its lowest in nearly a year as output plunged to the lowest since 2011, the poll showed.
Falling stockpiles could prop up benchmark palm oil prices , which fell for two sessions on the back of a stronger ringgit before it rose Friday, tracking competing vegetable oils, to about 2,518 ringgit ($611) per ton.
End-stocks for February are forecast to drop 9 percent from a month ago to 2.31 million tons, the lowest since March 2015 , the poll showed.
A sharp reduction in output likely caused inventories to fall, as lower seasonal production and dry weather because of the El Nino weather phenomenon lowered fresh fruit bunch yields.
The poll forecast Malaysia’s February production to fall 5 percent from a month ago to 1.17 million tons, its lowest output levels since January 2011.
The El Nino brings scorching heat across Southeast Asia, damaging crops and decreasing production. Analysts expect it to reduce palm oil’s output growth in top producers Malaysia and Indonesia this year, though recent rains could lessen its impact.
“Beyond February, inventory levels should decline below 2 million tonnes soon in March, and get close to 1.5 million tonnes in the second quarter of 2016,” said Alan Lim, a plantations analyst at MIDF Research in Malaysia.
“The impact of the El Nino is now established and we believe production will be significantly lower than what it used to be in the first half of 2016.”
The median figures from the Reuters survey imply domestic consumption of 221,186 last month. Breakdown of February estimates (in tons):
Range Median Production 1,145,301 – 1,220,479 1,183,158 Exports 1,170,654 – 1,268,760 1,212,542 Imports 33,069 – 77,161 44,092 Closing Stocks 2,276,507 – 2,467,642 2,314,853
*Official stocks of 2,543,961 tons for January, plus the above estimated output and imports give a total January supply of 3,771,212 tons. Based on the median of the exports and closing stock estimates, Malaysia’s domestic consumption in February would be 243,815 tons.
