Palm oil inventories in Indonesia, the world’s largest producer, probably tumbled in April to the lowest level in six months as domestic consumption increased for food and biofuel.
Stockpiles fell 5.1 percent from March to 2.8 million metric tons, according to the median of estimates from three plantation executives, an analyst and a refiner compiled by Bloomberg. That’s the lowest level since an estimated 2.6 million tons in October and represents a 20 percent plunge from a record 3.5 million tons in January. Production increased 10.5 percent to 2.1 million tons, while exports rose 0.6 percent to 1.71 million tons, the median of six estimates showed.
A third monthly decline in reserves may curb this year’s 5.6 percent loss in futures traded in Kuala Lumpur. Prices advanced last week after data showed inventories in Malaysia, the second-biggest supplier, slid to the lowest level in 10 months. Indonesia is set to consume about 33 percent of its estimated output in 2013, according to the palm oil board.
“Domestic use is increasing for food as well as for biodiesel,” said Derom Bangun, chairman of the Indonesian Palm Oil Board. The country will probably consume 9.2 million tons this year, including 2.4 million tons for biodiesel, he said, without providing a comparison. Production will reach 28 million tons from 25.7 million tons in 2012, he said.
Prices dropped 0.4 percent to 2,301 ringgit ($770) a ton on the Bursa Malaysia Derivatives by 5:48 p.m. Kuala Lumpur time after climbing 0.7 percent. Futures had their best performance in seven weeks in the five days ended May 10 after the Palm Oil Board in Malaysia said reserves fell 11 percent to 1.93 million tons in April, the lowest since June.
Palm’s discount to soybean oil exceeds $300 per ton, keeping it attractive compared with other oils, Rabobank International analysts Luke Chandler and Keith Flury wrote in a report dated May 10. Palm has averaged $324.36 less than soybean oil this year, compared with a discount of $201.27 in 2012. Both are used in food and fuels.
Global palm oil exports are forecast to climb to 43.6 million tons in 2012-2013 from 40.4 million tons a year earlier, while shipments of palm-kernel oil may rise to 3.44 million tons from 3.08 million tons, Oil World said in a report e-mailed May 7. The increase will be driven by demand in India and China, the Hamburg-based researcher wrote.
Still, record inventories in China and India may limit imports and curb declines in stockpiles in producing nations, Rabobank said in the report.
Cooking oil reserves in India were 2.1 million tons at the start of April, near an all-time high of 2.12 million tons in March, the Solvent Extractors’ Association said. In China, palm stockpiles expanded to a record 1.35 million tons last week, China National Grain and Oils Information Center data showed.
From this month, demand may improve as importers book shipments for the Muslim fasting month of Ramadan starting in July, said Eddy Martono, a director at Jakarta-based planter PT Mega Karya Nusa. Usage expands in Ramadan as followers break daylong fasts with communal meals, boosting purchases from the Middle East to India. Demand will also increase in Indonesia, the most populous Muslim country, Bangun said.