KUALA LUMPUR: Palm oil inventories in Malaysia, the world’s second-largest producer, are expected to slip to an eight-month low in May, weighed down by a decline in production, according to a Reuters poll.
Malaysia’s palm oil stockpiles at end-May are forecast to fall 3.8 percent from April to 2.09 million tonnes.
This would be its fifth consecutive month of declines, according to the median of 8 estimates from planters, traders and analysts surveyed by Reuters.
Easing inventories could support palm oil futures, which have been declining due to lean demand. Buyers typically stock up palm oil ahead of the Muslim fasting month of Ramadan, which began mid-May this year.
Palm was last down 0.1 percent at 2,406 ringgit ($605.44) a tonne on Tuesday afternoon.
The poll’s respondents expect production in May to fall to 1.49 million tonnes, a drop of 4.4 percent from April, in a second consecutive month of declines.
The decline in production is attributed to a higher number of public holidays and Ramadan, which also slows down workers’ productivity.
“May 1 was a holiday and we had some days off for elections before Ramadan started,” said Ivy Ng, regional head of plantations research, CIMB Investment Bank, adding that normalizing yields were contributing to a weaker output.
“January to March saw a high production base… The improvement in yield for that many months cannot sustain so now it is tapering off. We cannot expect high growth to sustain throughout the rest of the year.”
Meanwhile, exports in May are expected to fall 9.2 percent to 1.40 million tonnes, their lowest in three months, according to the poll.
“India’s rupee is weakening and Indonesian palm oil prices are cheaper,” said a Kuala Lumpur-based trader.
“Looks like bad exports are here to stay.”
Apart from high taxes, a weakening rupee in India, the world’s top importer of palm oil, has further affected buyers’ ability to import palm oil, said traders and industry players.
Also weighing on palm demand is Malaysia’s resumption of crude palm oil export duties in May at a 5 percent rate, after four months of tax exemptions in a bid to encourage demand and reduce stockpiles.
Official data will be released by the Malaysian Palm Oil Board ?after 0430 GMT on June 11.
The median figures from the Reuters survey imply Malaysian consumption of 209,235 tonnes in May.
Source: Brecorder
