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Palm Oil Output in Malaysia May Drop as Peak Season Closes

Godrej International Ltd. Director  Dorab Mistry
Dorab Mistry, director of Godrej International Ltd., said futures may rally to a four-year high of 4,000 ringgit ($1,277) a ton in the next seven months as growth in output decelerates in Indonesia and Malaysia. Photographer: Goh Seng Chong/Bloomberg

Palm oil output in Malaysia, the world’s second-biggest producer after Indonesia, probably declined from a two-year high last month after the peak-harvest season ended, according to a Bloomberg News survey.

Output fell 11 percent to 1.7 million metric tons in November from 1.91 million tons in October, according to the median estimate in the survey of four analysts and two plantation companies last week. Production was 1.46 million tons a year earlier, according to the Malaysian Palm Oil Board, which is scheduled to publish the official estimates on Dec. 13.

Lower output may cut stockpiles and help prices to gain for a third month in December. Futures may rally to a four-year high of 4,000 ringgit ($1,277) a ton in the next seven months as output growth decelerates in Indonesia and Malaysia, Dorab Mistry, director of Godrej International Ltd. said on Dec. 2.

“The decline in production is owing to the off-season slowdown and certain disturbances due to heavy rains,” Murali Krishna P.V., chief executive officer of TransGraph Consulting Pvt., wrote in an e-mail. The reduction in palm oil supply will be offset by improving soybean and rapeseed crops, barring damage from bad weather, he said.

Palm oil output typically peaks between July and October, before tapering off. Heavy rains during the year-end monsoon can disrupt harvesting, further slowing production. Soybeans and rapeseed can be crushed to produce rival edible oils.

Stockpiles Drop

Palm oil inventories in Malaysia probably fell 1 percent to 2.08 million tons, staying above the 2 million-mark for a third month, according to the survey. Exports may drop 12.5 percent to 1.61 million tons, the survey showed. Shipments fell 8.8 percent to 1.53 million tons in November compared with 1.68 million tons in October, surveyor Intertek said Nov. 30.

Palm oil for February delivery declined 0.9 percent to 3,094 ringgit per ton at the midday break on the Malaysia Derivatives Exchange. The most-active contract, which gained 2.7 percent last month and 1.1 percent in October, reached a five-month high of 3,270 ringgit on Nov. 18.

“Because of the high price people were not willing to buy substantially,” said Ivy Ng, an analyst at CIMB Group Holdings Bhd. “Exports are probably slowing but could pick up next month because Chinese New Year is just around the corner.” The Lunar New Year will fall at the end of January.

Futures may advance to 3,300 ringgit by January and 4,000 ringgit by June, Mistry said, keeping a forecast made in July. Malaysian production may be “flat” in 2012, between 18.6 million and 19 million tons, while output in Indonesia may reach 26.5 million tons on new acreage, he said.

Malaysian output probably gained 11 percent to 17.5 million tons in the 11 months through November from a year earlier, according to the survey. Production may climb 2.2 percent to 18.7 million tons next year from an estimated 18.3 million tons this year on rising yields and replanting of aging trees, the nation’s finance ministry said on Oct. 7.

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