Palm oil stockpiles in Malaysia, the biggest producer after Indonesia, probably climbed 15 percent in September to a record as production surged and demand slowed.
Inventories increased to 2.43 million metric tons from 2.12 million tons in August, according to the median of estimates from five analysts and two plantation companies compiled by Bloomberg. The previous record was 2.27 million tons in November 2008, Palm Oil Board data show. Output climbed 10 percent to 1.83 million tons from 1.66 million tons, while exports rose 4.9 percent to 1.5 million tons from 1.43 million tons, the survey showed. The data are released on Oct. 10.
Palm oil, used in everything from candy to biofuel, has declined 20 percent since the end of August on concerns that rising stockpiles will expand as the global slowdown curbs demand. Lower prices may hurt revenue at growers including Sime Darby Bhd. (SIME), the biggest listed producer. Output typically peaks from July to October.
“Production has rebounded a little bit stronger than we were expecting,” Erin FitzPatrick, an analyst at Rabobank International, said by phone from London. “Right now, we’re pricing in an incredibly large amount of stockpiles. I’m not ready to call it a bottom yet, but from a fundamental perspective, I think the market is oversold.”
Palm oil for December delivery advanced as much as 4.1 percent to 2,448 ringgit ($801) a ton on the Malaysia Derivatives Exchange and traded at 2,417 ringgit at 5:14 p.m. local time. Futures slumped 8.5 percent to 2,255 ringgit on Oct. 2, the lowest close for the most-active contract since November 2009 and the biggest drop since October 2008.
The world’s most-used cooking oil is poised to resume its decline in the next few days and may drop to $749 a ton for cargoes delivered in Rotterdam, said Dorab Mistry, director at Godrej International Ltd. The price was $805 yesterday, data compiled by Bloomberg show. Still, analysts at Maybank Investment Bank Bhd. believe prices have bottomed out.
“The wide discounts to competing oils will provide a good cushion against further weakness,” Ong Chee Ting and Chai Li Shin, analysts at Maybank, wrote in a report. “CPO prices may continue to stay weak for the next one to two months. We expect a meaningful CPO price recovery to only happen when inventories are reduced towards November and December.”
The tropical oil’s discount to soybean oil reached $378.98 a ton on Oct. 2, the most since September 2008. Exports from Malaysia lost 0.7 percent to 1.44 million tons in September from a month earlier, surveyor Intertek estimated on Oct. 1.
A proposal to cut export taxes on crude palm oil to between 8 percent and 10 percent from 23 percent will be presented to the Malaysian cabinet today, Plantations Industries and Commodities Minister Bernard Dompok said Oct. 3. Unused duty- free export quota may be redistributed, he said.
“The reallocation of unutilized tax-free CPO export quota is highly positive,” according to Alvin Tai, an analyst at OSK Investment Bank Bhd. “It does appear that some quota was given to parties who were not able to shift inventory, so this reallocation will help to reduce excess CPO.”
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