Palm Oil Reserves in Malaysia Seen Holding Near Highest Ever

Palm oil stockpiles in Malaysia, the world’s biggest producer after Indonesia, probably held near a record last month as production exceeded exports, according to a Bloomberg survey.

Inventories were 2.5 million metric tons compared to 2.51 million tons in October, according to the median of estimates from four analysts and two plantation companies. Output probably fell 5.7 percent to 1.83 million tons, while exports gained 1.7 percent to 1.79 million tons, the survey showed. The Malaysian Palm Oil Board is scheduled to release official data on Dec. 10.

Futures of the oil used in food and biofuels are headed for the worst annual slump since the financial crisis in 2008 on lower demand and the biggest ever reserves. That decline may pare profits and revenues at producers including Sime Darby Bhd. and Golden Agri-Resources Ltd. For 2013, Rabobank International has picked palm oil as likely to be the best-performing agricultural commodity as the stockpiles drop and sales revive.

“It’s still a buyers’ market because they know there’s a lot of stock and they don’t need to hurry,” said Ivy Ng, an analyst at CIMB Group Holdings Bhd. in Kuala Lumpur. Prices are “unlikely to rebound significantly,” she said.

Palm oil for February delivery gained 0.5 percent to close at 2,295 ringgit ($754) a ton on the Malaysia Derivatives Exchange. Futures, which touched a three-year low of 2,220 ringgit on Nov. 12, are down 28 percent this year.

November Peak

Stockpiles may have risen to 2.6 million tons last month, making November the year’s peak for reserves, Ong Chee Ting and Chai Li Shin, analysts at Maybank Investment Bank Bhd., wrote in a report today. Lower output will cut the stockpiles from this month onward, lifting prices, they wrote.

“People were expecting that perhaps stocks could cool down a bit in the month of November,” said Ng. “It doesn’t seem like that is going to be the case because the production didn’t drop as much,” with strong output seen in Sabah, she said.

Sabah, on Borneo Island, is Malaysia’s top producing state, accounting for about 29 percent of total output in the first 10 months of 2012, according to palm oil board data. Production usually peaks from July to October, then tapers off in November.

Dorab Mistry, director at Godrej International Ltd., revised his forecast for Malaysian stockpiles on Jan. 1 to 2.7 million to 2.8 million tons from a previous call of 3 million tons. Prices will trade between 2,300 ringgit and 2,600 ringgit a ton between now and February, he told a conference Nov. 30.

Best Performer

Palm oil may be the best performer next year, trading at 2,700 ringgit by the fourth quarter, Rabobank analysts led by Luke Chandler said in a Nov. 28 report. Dwight Anderson, founder of Ospraie Management LLC, said yesterday that he expected palm oil to be among commodities that outperform in 2013.

Inventories may take longer to deplete in the New Year as China, the biggest cooking oil user, may import less once new food-safety rules come into effect Jan. 1, said CIMB’s Ng. “The concern post-December is how the demand will move,” she said.

China’s palm oil inventories at major ports may exceed 1 million tons by the year-end as an estimated 700,000 tons will arrive in China in each of the final two months of the year, the China National Grain & Oils Information Center said on Dec. 3.

Exports from Malaysia rose 3.9 percent to 1.66 million tons in November from a month earlier, surveyor Intertek estimated on Nov. 30. Shipments gained 5.2 percent to 1.65 million tons in the same period, according to Societe Generale de Surveillance.

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