(Corrects scope of output decline in headline and text.)
Palm oil stockpiles in Malaysia, the world’s second-largest producer, contracted for a second month in February as production declined more than expected to the lowest level in 10 months, according to official data.
Inventories shrank 5.2 percent to 2.44 million metric tons, the Malaysian Palm Oil Board said today, matching the median estimate in a Bloomberg survey published March 5 and 18 percent higher than a year ago. Output fell 19 percent to 1.3 million tons, the lowest level since April and more than the 13 percent drop estimated in the survey. Exports retreated 14 percent to 1.4 million tons, according to data from the board.
Prices in Kuala Lumpur have dropped 26 percent over the past year as stockpiles remain near record levels on rising global oilseed supplies and slowing demand. A bear market in palm is poised to deepen in 2013 as the most-used cooking oil slumps to less than 2,000 ringgit ($642) a metric ton on increased global supplies of vegetable oils, Dorab Mistry, director at Godrej International Ltd., said on March 6.
The drop in production will be “near-term positive” for prices, said Gnanasekar Thiagarajan, director at Mumbai-based Commtrendz Risk Management Services Pvt. Output may continue to be at these levels this month, he said.
Palm oil for May delivery ended little changed at 2,450 ringgit a ton on the Malaysia Derivatives Exchange, the highest price at close since Feb. 25.
January and February are usually the lowest production months in the year. Malaysia may produce 19.5 million tons to 19.7 million tons this year, according to Mistry. That’s more than the 18.9 million tons forecast by the nation’s palm board and higher than last year’s output of 18.8 million tons. Reserves reached a record 2.63 million tons in December.
“Demand is going to be incrementally less, and supply will be incrementally higher” this year, said Gnanasekar.
Malaysia said in October it would cut the export tax to between 4.5 percent and 8.5 percent, from about 23 percent, from Jan. 1, to clear out the stockpiles. The tariff for March was 4.5 percent after being set at zero in January and February as the base price was below the threshold that triggers the minimum rate. Indonesia, the biggest grower, fixed the duty at 10.5 percent this month.
In the first 10 days of this month, exports from Malaysia were little changed at 441,025 tons from 440,830 tons in the same period of February, Intertek said today. Shipments gained 2.2 percent to 438,549 tons in the same period, Societe Generale de Surveillance said.
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