Palm oil stockpiles in Malaysia dropped to the lowest level in three months in January as output in the world’s second-biggest producer after Indonesia tumbled to a seven-month low. Futures climbed to a one-month high.
Inventories fell 2.6 percent to 1.93 million metric tons from a month earlier, while exports lost 9.9 percent to 1.37 million tons, the Malaysian Palm Oil Board said today. The median of estimates in a Bloomberg survey was 1.98 million tons for reserves and 1.35 million tons for exports. Production fell 9.6 percent to 1.51 million tons, in line with the survey and the lowest since June, according to board data.
Futures capped the biggest monthly loss since July last month on concern that exports may drop as rising supplies of alternative cooking oils reduce the appeal of the tropical oil used in food to fuel. Palm oil’s discount to soybean oil narrowed to $79.53 a ton compared with an average of $214.18 in the past year, according to data compiled by Bloomberg.
“Although inventories have come below estimates, exports have been lower and this will limit gain in prices,” said Chandran Sinnasamy, head of trading at LT International Futures Sdn. in Kuala Lumpur. “Inventories may drop by about 3 percent this month because of declining output.”
Production is typically lowest in January and February because of growing cycles and the annual rainy season, while exports decrease during the Northern Hemisphere winter as the tropical oil clouds in cooler temperatures. Inventories at the end of January were the lowest since October and 27 percent less than the record 2.63 million tons reached in December 2012.
The contract for delivery in April jumped 1.5 percent to 2,616 ringgit ($783) a ton on the Bursa Malaysia Derivatives, the highest price at close for most active futures since Jan. 3. Prices retreated 3.8 percent last month after climbing 9.1 percent in 2013.
“Demand will be slow in the first quarter as consumers such as India have already bought enough in November-December and exports will pick up only in the April-June quarter,” said Sinnasamy. He expects exports to drop 5 percent in February.
Shipments from Malaysia gained 4 percent to 309,455 tons in the first 10 days of February from the same period last month, surveyor Intertek said today. World exports of palm oil may decline for the first time in 16 years, dropping 2.3 percent to 43.2 million tons in 2013-2014 from a season earlier, Oil World, a Hamburg-based researcher, estimates.