Malaysian Palm Reserves, Production Gains Miss Analyst Estimates

Palm oil stockpiles and output in Malaysia, the world’s second-largest producer, increased less than analysts’ expectations last month, potentially boosting prices of the most-consumed cooking oil.

Inventories rose 7 percent to 1.78 million metric tons from August, the highest level since May and the biggest jump since September last year, according to data from the Malaysian Palm Oil Board. Output gained 10 percent to 1.91 million tons, the highest since October last year. That compares with the median estimate of 1.89 million tons for reserves and 2 million tons for output in a Bloomberg survey published last week. Exports rose to 1.61 million tons, above the estimated 1.55 million tons.

Futures declined to an almost four-year low in July on prospects of expanding global supplies. Prices have rallied since then on sustained demand from overseas buyers and as worsening conditions threatened the U.S. soybean crop, crushed to make a substitute oil. Palm, used in everything from candy to biofuel, is produced year-round with supply accelerating in the second half because of growing cycles.

“The stockpiles have come below expectations and that should strengthen prices,” said Ben Santoso, an analyst with DBS Vickers Securities Pte., by phone from Singapore.

Palm oil for December delivery was little changed at 2,366 ringgit ($738) a ton on the Bursa Malaysia Derivatives. Futures have rallied 11 percent since reaching 2,137 in July, the lowest level since October 2009. Soybeans rebounded 11 percent since reaching a 19-month low in August.

Palm oil shipments from Malaysia advanced 17 percent to 542,274 tons in the first 10 days of October from the same period last month, Intertek said today.

Record Supplies

Prices are still heading for a third annual loss, the worst run since at least 1996. Global palm oil supply will advance 5 percent to a record 58.1 million tons in 2013-2014, boosting stockpiles by 17 percent to an all-time high of 9.2 million tons, the USDA estimates.

“We are still concerned about increasing production in October,” said Santoso, who expects palm to average 2,300 ringgit in the fourth quarter. “The market is still waiting to see a seasonal peak and yields to recover.”

World production of soybeans will jump 5.3 percent to 281.7 million tons in 2013-2014 as U.S. recovers from a drought last year and Brazil heads for the biggest crop ever, making it the largest producer, according to the U.S. Department of Agriculture.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

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

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