Palm oil shipments from Indonesia, the world’s biggest producer, probably advanced for the first time in four months in May on increasing demand for the Muslim fasting month of Ramadan. Prices climbed to a three-month high.
Exports of the cooking oil, used in everything from noodles to biofuel, rose 5.4 percent to 1.57 million metric tons from April, the median of estimates from three plantation executives, a refiner and an analyst compiled by Bloomberg showed. That’s the first gain since an 8.2 percent increase in January. Output dropped 4.8 percent to 2 million tons and inventories decreased 7.1 percent to 2.6 million tons, the survey showed.
Purchases before Ramadan, which starts in July, may extend a rally in futures for a second month as stockpiles in the second-largest producer Malaysia drop to an 11-month low. While Standard Chartered Plc forecasts demand will outstrip supply in 2013, Dorab Mistry, a director at Godrej International Ltd., said last month prices will drop after July as output climbs. Communal meals during the fasting month increase demand.
“Buyers have started to boost imports to meet increasing cooking oil consumption for Ramadan,” Hariyanto Wijaya, a Jakarta-based analyst at PT Mandiri Sekuritas, a unit of the nation’s largest lender by assets. Stockpiles, estimated at a record 3.5 million tons in January, may start to increase again as demand slackens after July and output gains, he said.
Futures advanced as much as 0.7 percent to 2,480 ringgit ($786) on the Bursa Malaysia Derivatives in Kuala Lumpur today, the highest level since March 25. Prices are up 3.2 percent this month after rising 4.9 percent in May. The Indonesian Palm Oil Association, which doesn’t release output and stockpiles data, may publish the export figures next week.
Palm may drop to 2,000 ringgit a ton as output climbs in Indonesia and Malaysia, rebuilding stockpiles, Mistry said on May 21. Reserves in Indonesia may recover and begin to increase before peaking again in the fourth quarter, he said.
Inventories in Malaysia fell 5.1 percent to 1.82 million tons in May as output growth slowed, the nation’s palm oil board said June 10. Exports from the country jumped 18 percent to 709,860 tons in the first 15 days of this month, surveyor Intertek said on June 15. The Indonesian Palm Oil Board said last month production will reach 28 million tons from 25.7 million in 2012.
That estimate was lower than an earlier forecast of 30 million tons, Abah Ofon, an analyst at Standard Chartered in Singapore, said in a June 10 report, which estimated prices to average 2,600 ringgit in the third quarter and 2,750 ringgit in the last three months of 2013.
“We expect CPO prices to be supported by lower-than-expected output from Indonesia,” Ofon said, referring to palm oil by its initials. “We believe that its 2 million-ton production cut will stem any sustained decline in CPO prices.”
While palm’s discount to soybean oil has narrowed to less than $300 per ton, it’s still at “attractive levels for consumers relative to other vegetable oils,” Pawan Kumar, an analyst at Rabobank International, said last week. The discount was at $270.86, data compiled by Bloomberg showed.
Imports by India, the biggest buyer, rose 10 percent in May to 755,871 tons, the highest level in three months, the Solvent Extractors’ Association of India said June 13. Demand may climb after reserves at major ports in China, the second largest user, fell to 1.32 million tons, researcher Grain.gov.cn said June 7.
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