Palm-oil reserves in Indonesia, the largest producer, may total about 4 million metric tons, twice as much typically estimated, according to Godrej International Ltd., which forecast a rise in Malaysian stockpiles to a record.
“It is difficult to be bullish on palm-oil prices,” Dorab Mistry, a director at Godrej International Ltd., told a conference in Singapore, citing the stockpiles, slower economic growth and rising output. The tropical oil may trade between 2,900 ringgit ($930) and 3,300 ringgit a ton this month and next, he said. The most-active contract slumped as much as 2.6 percent to 2,913 ringgit a ton on Malaysia Derivatives Exchange today.
The reserves in the two largest producers may limit price gains even as soybeans, which can be crushed to produce a rival oil, are poised to extend a record rally after drought curbed supplies. Benchmark palm oil in Malaysia has dropped 8.2 percent this year, helping restrain gains in global food costs spurred by the worst U.S. drought in more than half a century.
“The big story of 2012” is the stockpiles in Indonesia, Mistry told the gathering organized by Goldman Sachs Group Inc. today, according to a copy of his remarks “Normal stocks of palm products in Indonesia in the last two years have been of the order of 3.5 to 4 million tons, as against the normal, conventional guesstimate of 1.5 to 2 million tons.”
Palm oil, the most-consumed vegetable oil, is used in everything from instant noodles to soaps and biofuels. Mistry, based in London, has traded vegetable oils for more than three decades. Indonesia doesn’t release official data on stockpiles and production, with export estimates available from the Indonesia Palm Oil Association. Malaysia does issue figures.
“Indonesia doesn’t have proper statistics, and we can’t actually see 4 million tons lying there,” Chandran Sinnasamy, head of trading at LT International (M) Sdn., said by phone from Kuala Lumpur. “High stocks is a non story because even two months ago people know that production is rising and stockpiles are going to be built up around October and November.”
Palm oil has dropped in 2012 while soybeans rallied 44 percent. The divergence has widened palm oil’s discount to soybean oil to $332 a ton today, the biggest difference since 2008, according to data tracked by Bloomberg. The November-delivery palm-oil contract traded 2.5 percent lower at 2,914 ringgit at 3:56 p.m. in Kuala Lumpur.
“These hidden, or hitherto ignored, palm-oil stocks in Indonesia are the key reason for the dismal performance of palm oil,” said Mistry, who said he looked into Indonesian holdings after tax changes in 2011. “Until recently, it has been the opinion of most analysts that Indonesia hardly kept palm-oil stocks and that Malaysian palm-oil stocks were the bigger.”
Palm-oil stockpiles in Malaysia probably rose to an 11-month high of 2.14 million tons in August from 2 million tons in July, according to the median in the Bloomberg survey of analysts and plantation companies yesterday. Inventories reached a record 2.27 million tons in November 2008, according to data from the nation’s Palm Oil Board. Mistry didn’t give an estimate.
Output in Malaysia may gain to about 2 million tons in September and October driven by a seasonal upswing, and 2012 production may be 18.2 million tons, Mistry said. Indonesian production may peak in November, with annual output of about 27 million tons compared with 25.2 million tons last year, he said.
“A big chunk of stockpiles in Indonesia are due to the very tardy logistics,” said Mistry. “It can take up to two months for the fresh-fruit bunches harvested in Kalimantan to be converted into refined palm products and exported,” Mistry said. Kalimantan is the Indonesian portion of Borneo Island.
Soybean may rally to as much as $20 a bushel in December, according to Mistry, while corn may gain to about $9 a bushel. The most-active soybean contract reached an all-time high of $17.89 on the Chicago Board of Trade on Sept. 4, while corn reached a record $8.49 a bushel on Aug. 10.