Palm oil shipments by Indonesia, the world’s largest producer, probably advanced to the highest level in nine months in November as rising prices prompted exporters to boost supplies. Futures gained.
Sales of palm and kernel oils rose 2.2 percent to 1.9 million tons from October, the median of estimates from five planters, traders and refiners compiled by Bloomberg showed. That’s the highest since February, data from the Indonesian Palm Oil Association show. Production remained at 2.4 million tons for a third month, according to four respondents. That brought output to 24.25 million tons in the first 11 months.
Shippers of the world’s most consumed cooking oil are seeking to increase overseas sales after futures reached a 14-month high in Kuala Lumpur in November. Prices are heading for the first annual gain in three years on speculation Indonesian output will decline for the first time since 1998. Production may drop 500,000 tons to 27.5 million tons, Dorab Mistry, director at Godrej International Ltd., said Nov. 29.
“Producers tried to boost exports after prices gained and shipments will remain high in December” as companies must meet contracts, said Derom Bangun, chairman of the Indonesian Palm Oil Board. He forecasts output of 2.2 million tons in December. That brings the total for the year to 26.45 million tons when added to the number in the Bloomberg surveys.
Futures advanced 5.4 percent this year to 2,570 ringgit ($793) a ton on Bursa Malaysia Derivatives today after reaching 2,692 ringgit on Nov. 22, the highest since September 2012. Palm may average 2,625 ringgit a ton in the second quarter, Rabobank International estimates.
India, the biggest buyer, imported 550,663 tons in November from 534,556 tons a year earlier, according to the Solvent Extractors’ Association of India. Purchases by China, the second-biggest importer, would reach 550,000 tons in December after 500,000 tons in November, a survey showed last week.
While the Indonesian association doesn’t publish inventory and output data, it may release export figures this week. The changes in output and reserves are derived from earlier surveys.
The figure for output in 2013 compares with Bangun’s Nov. 29 estimate of 26.2 million tons. Production will be 26.5 million tons this year from 27 million tons in 2012, according to the median of five grower estimates compiled by Bloomberg last month. The U.S. Department of Agriculture predicts a crop of 28.5 million tons.
Reserves probably rose 2.9 percent to 2.1 million tons in November from a month earlier and may decline to 2 million tons by the end of the year, according to estimates from four producers and refiners.
Supplies will shrink as the country increases the use of palm-based biodiesel, said Sahat Sinaga, executive director at the Indonesian Vegetable Oil Industry Association, who forecasts that exports and reserves may drop to 1.7 million tons and 1.5 million tons in December.
Indonesia raised in September the amount of palm-derived biodiesel that producers must blend into subsidized fuel to 10 percent from 7.5 percent. The requirement will be extended to non-subsidized fuel and industrial users in January and power plants will be obliged to use supply with a 20 percent blend.
A third of output may be used in fuel in one or two years if the government is consistent in applying the policy, Mahendra Siregar, head of the Investment Coordinating Board, said last month. About 3 percent of the crop is used as fuel now, according to the Indonesian Biofuels Producers Association.
Global biofuel demand may expand on larger mandates from Southeast Asia to South America and boost vegetable oil prices, according to Mistry, who expects palm oil production in Indonesia to rebound to 30.5 million tons in 2014.
Output will recover next year to 29.5 million tons as yields increase and new areas mature, Bangun said last month. Exports will be about 18 million tons in 2014 and may drop significantly in the next few years as more supplies are used for biodiesel output.
“Undoubtedly, biodiesel programs are among the strongest bullish drivers for palm prices in 2014,” Rabobank analysts led by Luke Chandler in Sydney, said in a report e-mailed last week. “Delays in implementing these mandates and a decline in crude oil prices could dampen the impact of these programs and reduce bullishness,” said the bank.
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