Palm oil stockpiles in Malaysia expanded to the highest since November after production climbed in the world’s biggest supplier after Indonesia.
Stockpiles rose 5.3 percent to 2.27 million metric tons in July from a month earlier and 34 percent from a year ago, Malaysian Palm Oil Board data showed Monday. Output rose 2.9 percent to 1.82 million tons from June to a record for July and the highest since October. The median estimates for inventory and production were 2.16 million tons and 1.78 million tons respectively in a Bloomberg survey published last week.
Rising supplies may further weaken futures which slumped this month to the lowest level since September and are headed for a fourth annual loss in five years. Production in the world’s top growers will climb more than forecast to a record this year as a “lazy” El Nino event fails to curb output, sending prices to a 6 1/2-year low by the end of September, according to Dorab Mistry, director at Godrej Industries Ltd.
“Initially, we were expecting the El Nino effect but at the moment we don’t really see that,” Benny Lee, market strategist at Jupiter Securities in Kuala Lumpur, said by phone. “We still see quite good rains. Production will still remain high at least in the next two months.”
Futures closed at 2,029 ringgit ($514) a ton on Bursa Malaysia Derivatives in Kuala Lumpur on Monday. Prices reached an 11-month low of 2,006 ringgit on Aug. 6 and are down 10 percent this year.
Prices may slump next month to 1,900 ringgit, a level last seen in March 2009, Mistry said on Aug. 6, reiterating a forecast made in April. A drop to that level would put palm oil into a bear market. Stockpiles in Malaysia may hit a record 3 million tons by the end of November, he said.
Exports fell 5.6 percent to 1.6 million tons, after reaching 1.7 million tons in June, the highest level since October 2012, board data show. Malaysia exported 498,993 tons in the first 10 days of August, a 57 percent surge from the same period in July, surveyor Intertek said on Monday.