Palm oil exports from Indonesia, the world’s largest producer, will probably drop to the lowest level in five months in December as a global economic slowdown curbs demand, according to a Bloomberg survey.
Shipments may fall 3 percent to 1.55 million metric tons from an estimated 1.6 million tons in November, according to the median of estimates from two traders, a plantation executive, refiner and an analyst compiled by Bloomberg. Inventories may remain unchanged at 3 million tons, the survey showed. Production is set to drop to 2.51 million tons from 2.54 million tons, four of the respondents said.
Palm oil, used in everything from soaps to candy to biofuels, has slumped 24 percent since the end of August as a decline in demand from Europe and China boosted stockpiles in Indonesia and Malaysia, the top growers. The commodity will probably tumble into a bear market next year as monthly output in Malaysia and Indonesia surges to records, according to Dorab Mistry, director at Godrej International Ltd.
“Demand from Europe is still weak especially for biodiesel,” Sahat Sinaga, executive director of the Indonesian Vegetable Oil Industry Association, said by phone from Jakarta. “We could see demand picking up in the first quarter with India maintaining its import tariff and recovery in China. It will help boost prices.”
Futures in Kuala Lumpur, the global benchmark, may rally to 2,700 ringgit ($886) a ton by January, Sinaga said. The commodity will trade between 2,300 ringgit and 2,600 ringgit a ton between now and February, and drop below 2,200 ringgit in August or earlier, Godrej’s Mistry told a conference on Nov. 30.
The contract for February delivery was little changed at 2,296 ringgit a ton on the Malaysia Derivatives Exchange today. Futures have lost 28 percent this year, set for the biggest annual loss since the financial crisis in 2008.
Food demand for palm oil “is still relatively stable because palm is cheap compared with other oils,” said Hariyanto Wijaya, an analyst at PT Mandiri Sekuritas. Exports typically slow in December because of year-end holidays, he said.
Indonesia’s exports this month would be the lowest since July, when they reached 1.51 million tons, according to data from the palm oil association, known as Gapki. Shipments were 1.8 million tons and 1.5 million tons in November and December of last year, data showed. Gapki, which releases monthly export data, doesn’t publish stockpiles and production figures.
Malaysia’s inventories probably held near a record last month as production exceeded exports, according to another Bloomberg survey published yesterday. Stockpiles were 2.5 million tons compared with 2.51 million tons in October, according to the median of estimates from four analysts and two plantation executives. 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.