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Palm Reserves in Indonesia Seen Climbing to Eight-Month High

Palm Oil Futures Retreat From 18-Month High
Workers inspect the quality of harvested oil palm fruit outside the processing mill at the Bell Eco Power Sdn. palm oil operations in Batu Pahat, Johor, Malaysia. Production in Malaysia, the second-biggest supplier, climbed in May to the highest level since December, boosting inventories to a four-month high, the Malaysian Palm Oil Board said June 10. Photographer: Goh Seng Chong/Bloomberg

Palm oil inventories in Indonesia probably advanced to an eight-month high in May, while shipments from the world’s largest producer were the second lowest since September 2012. Futures declined.

Stockpiles expanded 10 percent from April to 2.2 million metric tons, the highest since September, according to the median of estimates from six planters, industry officials and analysts compiled by Bloomberg. Production fell 2 percent to 2.3 million tons, the survey shows. Exports were 1.48 million tons after 1.38 million tons in April, it shows.

Futures in Kuala Lumpur have retreated from an 18-month high in March on speculation that global cooking oil supplies will increase amid a record soybean crop in the U.S., the biggest grower. Soybean oil in Chicago dropped 13 percent from this year’s high, narrowing its premium over palm. Imports by India, the top palm oil buyer, fell in May as traders bought more soybean and sunflower oils.

“India has bought lots of sunflower oil, probably from Ukraine, and reduced palm imports,” Derom Bangun, chairman of the Indonesian Palm Oil Board, said by phone June 9.

Shipments from Indonesia in April and May will total 2.9 million tons, the lowest since the 2.8 million tons exported in September and October 2012, based on data from the palm oil association. The group, which doesn’t publish production and stockpile data, may release export figures this week. Comparisons for output and reserves are based on surveys.

Indian Demand

Imports by India dropped 14 percent to 647,756 tons in May from a year earlier, the Solvent Extractors’ Association of India said in e-mailed statement today. Purchases of crude soybean oil more than tripled to 174,209 tons, while sunflower imports more than doubled to 178,753 tons, it said.

Palm futures fell as much as 0.2 percent to 2,422 ringgit ($751) a ton on Bursa Malaysia Derivatives today, retreating 17 percent from the high on March 11. Soybean oil fell to 39.40 cents a pound from the high of 45.05 cents on March 7. That helped cut its premium over palm to an average of $92 a ton this year from $244 in 2013, according to data compiled by Bloomberg.

Farmers in the U.S. will harvest 3.635 billion bushels of soybeans, the most ever, the Department of Agriculture estimates. World output of seven major oilseeds will be a record 487.5 million tons in the year to Sept. 30, according to researcher Oil World in Hamburg.

While Indonesia’s production probably decreased in May because of public holidays, the start of the annual high-output cycle in the second quarter will boost supply in coming months.

Output will increase and may reach its peak in October, Teguh Patriawan, director at PT Nusantara Sawit Persada, a Jakarta-based planter, said by phone on June 11.

Production in Malaysia, the second-biggest supplier, climbed in May to the highest level since December, boosting inventories to a four-month high, the Malaysian Palm Oil Board said June 10.

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