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Palm Oil Exports From Indonesia to Sink Most in Four Months

Palm oil shipments from Indonesia, the world’s largest producer, are poised to tumble the most in four months in October because of weak demand from importers.

Exports may slump 12 percent to 1.41 million metric tons from 1.6 million tons in September, according to the median of estimates from four plantation executives, a refiner and an analyst compiled by Bloomberg. That’s the biggest drop since June when shipments fell 13 percent. Output may climb to 2.43 million tons from 2.05 million, the survey showed. Stockpiles are about 2.6 million tons, according to three respondents.

Palm oil has plunged 21 percent since the end of August as the global slowdown hurt demand for the oil used in everything from candy to biofuel amid an increase in production in Indonesia and Malaysia. Buyers are monitoring prices to see what the export tax will be in November, said Sahat Sinaga, executive director at the Indonesian Vegetable Oil Industry Association.

“The tax will probably decline if the price direction stays the same, by how much we will have to see,” Sinaga said on Oct. 4. Indonesia kept the tax for crude palm oil exports at 13.5 percent in October and will decide the November rate at the end of this month, using average prices in Rotterdam, Kuala Lumpur and Jakarta from Sept. 20 to Oct. 19.

For now, the price decline may prompt buyers to renegotiate contracts or defer fresh orders, Sinaga said last week. Some buyers in India, the biggest importer, may default or review contracts as purchases are unprofitable, according to Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd.

Higher Inventories

Stockpiles in Indonesia may be higher than estimated in the survey. Inventories have hovered between 3.5 million tons and 4 million tons since 2010 compared with popular estimates in the range of 1.5 million tons to 2 million tons, said Dorab Mistry, director at Godrej International Ltd., on Sept. 6.

Overseas buyers have yet to take about 600,000 tons of crude palm oil piled up in storage tanks at Belawan port and at mills in North Sumatra province, Bisnis Indonesia reported last week, citing Timbas Prasad Ginting, secretary at the local branch of the Indonesian Palm Oil Association.

Reserves in Malaysia, the second-largest producer, probably climbed 15 percent in September to a record as production surged and demand slowed. Inventories increased to 2.43 million 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 2008, Palm Oil Board data show.

The contract for December delivery on the Malaysia Derivatives Exchange traded at 2,396 ringgit a ton at 5:18 p.m. today. Futures fell 8.5 percent to close at 2,255 ringgit on Oct. 2, the lowest settlement in almost three years.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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