Palm oil stockpiles in Malaysia, the second-largest grower, contracted in June to the lowest level in more than two years as output dropped in the biggest-producing state. The shrinkage in the reserves beat expectations.
Inventories fell 9.4 percent to 1.65 million metric tons, the lowest since March 2011, compared with May, the Malaysian Palm Oil Board said today. That’s less than the median estimate of 1.75 million tons in a Bloomberg survey. Output rose 2.3 percent to 1.42 million tons, while exports gained 0.3 percent to 1.41 million tons and imports lost 33 percent to 31,987 tons.
Futures have declined for five straight quarters as demand for the commodity used in everything from biofuels to noodles slowed. Output in the eastern state of Sabah fell 8.2 percent to 386,525 tons in June from 420,917 tons in May, board data show.
“Sabah’s production was weak,” said Alvin Tai, an analyst at RHB Investment Bank Bhd. “There will probably be a little bit of recovery in prices but don’t expect it to be significant. If this is the bottom I wouldn’t be surprised, because the tendency is for stockpiles to hit a trough in May or June. The high-crop season is starting now.”
Prices extended losses on the Bursa Malaysia Derivatives after the data was issued during the midday trading break. The September contract fell as much as 1.1 percent to 2,370 ringgit ($746) a ton and was at 2,373 ringgit at 4:44 p.m. in Kuala Lumpur. Most-active prices have dropped 2.7 percent this year.
Shipments from Malaysia declined 16 percent to 352,375 tons in the first 10 days of July from 419,035 tons in the same period last month, Intertek said today.