Malaysia July palm oil stocks likely to see first growth in three months

A truck carrying oil palm fruits passes through Felda Sahabat plantation in Lahad Datu, Sabah February 20, 2013. — Reuters pic
A truck carrying oil palm fruits passes through Felda Sahabat plantation in Lahad Datu, Sabah February 20, 2013. — Reuters pic

KUALA LUMPUR, Aug 4 — Malaysian palm oil stockpiles likely grew in July for the first time in three months as production gains outpaced export demand, a Reuters poll showed.

A rise in both inventories and output could pressure benchmark prices for the commodity, used to churn out everything from cooking oil to shampoo. Palm prices have slid nearly 2 per cent so far this week.

"Production came in higher as harvesters returned to the fields in July after the long Raya break in the previous month," said a manager at a Malaysian plantation company, referring to the Eid-Al-Fitr festival in June celebrated by Muslims worldwide.

Palm stocks at the end of July stood at 1.63 million tonnes, a 6.5-per-cent rise from the previous month, according to the median response of nine traders, planters and analysts surveyed by Reuters.

That would be the highest volume so far this year, but the lowest July level since 2010. Inventory levels in the third quarter of the year typically hover around the two-million-tonne mark.

Meanwhile, July production was forecast to have reached 1.68 million tonnes, up 11 per cent from the previous month and the strongest monthly gain since March.

The projected rise is higher than July's average monthly climb of 9.2 per cent over the past five years, but below earlier forecasts due to weaker output growth from Sabah, Malaysia's largest producing state, according to a report by Ivy Ng, regional head of plantations research at CIMB Investment Bank.

"However, our estimated production for July is below July 2015 output (pre-El Nino impact)," she said.

Analysts and planters say trees are still seeing lingering effects from a strong El Nino weather pattern in 2015 that brought dry weather to the region.

July's palm exports rose 4 per cent to 1.43 million tonnes in July, led by growing shipments to China and Europe, the survey showed.

Demand for the tropical oil is seen remaining steady in the coming months before picking up ahead of major festivities in October, Diwali in India and China's Mid-Autumn festival.

"I expect exports to remain good for the rest of the year as stocks in importing countries are relatively low, especially China," said the plantations company manager.

The median figures from the Reuters survey imply Malaysian consumption of 197,343 tonnes in July.

Official data will be released by the Malaysian Palm Oil Board after 0430 GMT on Aug 10. — Reuters

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