KUALA LUMPUR: Malaysia’s palm oil stocks rose for a third month in September to breach the 2-million-tonne mark for the first time in well over a year, boosted by weaker-than-forecast exports from the world’s No.2 producer of the commodity. Climbing inventories could drag on benchmark prices for the oil, used in everything from chocolate to shampoo. They stood around 2,733 ringgit ($647.32) a tonne at the midday break on Tuesday, after touching a one-week high in the previous trading session.
Malaysian end-September stockpiles rose 4 percent to hit their highest since February 2016 at 2.02 million tonnes, data from industry regulator the Malaysian Palm Oil Board (MPOB) showed on Tuesday. That was largely driven by weaker-than-forecast export-growth, and as production saw an unexpected monthly decline, said industry players. Production fell 1.7 percent to 1.78 million tonnes in a second month of declines, curbed by a higher number of public holidays in September compared with August, said a palm oil trader based in Singapore. “If you take into consideration the number of working days in August, it (productivity) is actually unchanged,” said the trader, asking not to be identified as he was not authorised to speak with media. “October production however will be 7 to 8 percent higher on-month, which is peak production for the year.” Palm oil typically sees output peaking in August or September, but industry players expect it to be delayed to October this year as trees are still suffering from the lingering impact of a strong El-Nino weather pattern, which dried fields around the region in 2015.
The MPOB data showed that exports came in weaker than expected, rising just 1.8 percent to 1.52 million tonnes on-month, compared to a Reuters forecast of a 7.8-percent gain. And while market participants had touted potentially stronger Indian demand ahead of the Hindu festival of Diwali, exports to India registered a monthly decline in September, said MIDF Research plantations analyst Alan Lim. “People were expecting higher pre-stock activities, but looks like the Indian traders bought earlier. The import tax could have affected the demand,” said Lim. India, the world’s biggest buyer of palm oil, raised import taxes on crude and refined edible oils in August. China’s demand however remained strong ahead of the Mid-Autumn festival in early October, said Lim. A Thomson Reuters survey had pegged inventory levels to rise 3.2 percent to 2 million tonnes in September. Production was seen up 1.5 percent at 1.84 million tonnes, while exports were seen rising 7.8 percent at 1.60 million tonnes.
