SINGAPORE, Aug 2 — Malaysia’s end-July palm oil stocks likely eased to their lowest in more than two years as demand for the tropical oil continued to outstrip production, a Reuters survey of five plantation companies showed today.

Inventory levels may have dropped 3 per cent to 1.6 million tonnes in July, from 1.65 million tonnes the previous month, according to the survey.

The projected seventh straight monthly decline would reduce the stocks to the lowest level since February 2011.

Output in the world’s second largest palm oil producer, meanwhile, likely rose 10 per cent from a month ago to 1.56 million tonnes in July, the biggest jump so far this year.

The increase in yield likely signalled the start of the typically higher production cycle seen July to December.

But output still probably fell short of the estimated 1.65 million tonnes of total demand represented by exports and local consumption, the companies surveyed said.

Exports probably rose 3 per cent to 1.45 million tonnes in July, the survey showed.

Local consumption

The median of the figures provided by the poll respondents imply domestic consumption in July of around 192,106 tonnes.

Malaysia’s imports of crude palm oil from top producer Indonesia most likely gained to 40,000 tonnes in July from 5,860 tonnes the previous month, according to the survey.

Factors to watch

The Bursa Malaysia Derivatives Exchange’s palm oil benchmark futures plunged to the lowest since October 2009 in July amid projections for a bumper soy crop.

A better soy harvest could raise soybean oil supply and shift demand away from palm oil.

Palm demand remains resilient for now, with India’s refined palm oil imports set to surge 69 per cent to a record in the year ending October, a key industry official has said, as consumption picks up pace ahead of the festival season starting in August.

A weaker ringgit may also bolster demand, traders said, as the ringgit-priced feedstock becomes cheaper for overseas buyers. The currency hit three-year lows this week after ratings agency Fitch downgraded Malaysia’s credit.

Indonesia, the top palm oil producer, kept its crude palm oil export tax unchanged at 10.5 per cent for August. Malaysia also left its export tariff unchanged for the sixth straight month at 4.5 per cent. — Reuters