(Bloomberg) -- Palm oil inventories in Malaysia, the world's second-biggest grower, likely shrank to the smallest in 10 months in May as overseas shipments rose on festive demand.
Stockpiles fell about 10% from April to 2.46 million metric tons, which would be the steepest monthly decline since August 2016, according to the median of eight estimates in a Bloomberg survey of analysts, traders and plantation executives. That would bring stockpiles to the lowest level since July.
Crude palm oil production eased 1.8% to 1.62 million tons, the lowest since February, while exports rose 3.6% to 1.71 million tons, the highest monthly level since August 2016, according to the survey. The Malaysian Palm Oil Board will release official data on June 12, it said.
- “Even as inventories ease, we are now entering the yearly main harvesting period and Indonesia has been in a high production cycle since April,” according to Marcello Cultrera, institutional sales manager at Phillip Futures Sdn in Kuala Lumpur.
- It's also worth watching Malaysia's import levels in May, he says. Malaysian palm prices have recently been about $30 a ton more expensive that those in nearby Indonesia and that may encourage imports.
- Crude palm oil prices are expected to face a sharp downtrend in the near term in-line with the bearish momentum in crude oil as well as palm traded in Dalian and Singapore markets.
- Benchmark futures will likely trade between 2,000 and 2,250 ringgit a ton in the second half of the year as demand improves, especially from India, according to the world's biggest palm planter Sime Darby Plantation Bhd.
- Estimates in the survey for palm stockpiles ranged between 2.31 million tons to 2.50 million tons.
- Output estimates varied from 1.60 million tons to 1.68 million tons, and for exports 1.65 million to 1.77 million tons.
- Malaysian palm oil imports are forecast to climb to 70,000 tons in May from 62,112 tons the previous month.
- Estimates for domestic consumption ranged from 220,000 tons to 330,000 tons.
- Benchmark palm futures on Bursa Malaysia Derivatives closed 1.3% higher at 2,055 ringgit a ton on Tuesday.
May 2019 (Survey) April 2019 (MPOB) May 2018 (MPOB) Production 1.62 1.65 1.53 Stockpiles 2.46 2.73 2.19 Exports 1.71 1.65 1.29 Imports 0.07 0.06 0.03 NOTE: May figures, in million metric tons, are based on the median of eight estimates.
To contact the reporter on this story: Anuradha Raghu in Kuala Lumpur at araghu3@bloomberg.net
To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Andrew Hobbs
©2019 Bloomberg L.P.
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