Malaysia October palm oil stocks climb sharpest in over a year

KUALA LUMPUR, Nov 4 — Malaysia’s palm oil inventories likely recorded their sharpest monthly gains in over a year in October, with declining exports outpacing a marginal rise in production. 

Rising stockpiles could dampen palm oil’s benchmark prices, which today were in line for the first weekly decline in a month after hitting a near two-week low at midweek.

Palm was down 0.5 per cent for the week, and was down 0.3

per cent at RM2,765 per tonne at midday break today.

Inventories in October rose 8.8 per cent from end-September to 1.68 million tonnes, according to a Reuters survey of eight planters, traders and analysts. That would be the strongest monthly climb since August 2015, and a second straight month of gains.

The inventories gained due to sharper declining exports compared with a rise in output, according to the survey.

October exports declined to 1.37 million tonnes, down 5.4 per cent from 1.45 million tonnes in the previous month, as demand from top consumers China and India weakened, the poll’s respondents said.

“Weak exports to China could be partly due to the release of rapeseed oil stocks from state reserves. India has already bought ahead for Diwali, and buying slows down during festive celebrations,” said Ivy Ng, regional head of plantations research at CIMB Investment Bank.

Diwali is a Hindu festival at end-October that is widely celebrated in India. 

“There may be some pick up (in Indian demand) in November... and December demand should pick up for China ahead of Lunar New Year celebrations, but it also depends on the release of (Chinese) rapeseed stocks.”

Production likely edged up 1.1 per cent to 1.73 million tonnes, its weakest October levels since 2010, with yields still suffering from the lagging, dry weather impact of last year’s El Nino.

The El Nino weather event typically brings scorching heat and dry conditions across Southeast Asia, lowering palm oil output in top growers Indonesia and Malaysia. 

“The age profile of Malaysian crops is older and so less resilient to extreme weather changes compared to Indonesia. Only fresh fruit bunch yields in Johor showed signs of normalcy while the rest of the country has very poor yields,” said a trader.

“But a normal monsoon should bring output recovery back in March or April,” the trader added. 

The median figures from the Reuters survey imply Malaysian consumption of 231,673 tonnes in October.

Official data will be released on November 10 by the Malaysian Palm Oil Board. — Reuters