Palm Oil Stockpiles in Malaysia Seen Near Record: Survey

Palm oil stockpiles in Malaysia, the world’s biggest producer after Indonesia, probably held near a record last month as exports declined amid low demand, according to a Bloomberg survey. Futures dropped to a two-week low.

Inventories of the oil used in food and biofuels were 2.53 million metric tons in December compared to an all-time high of 2.56 million tons a month earlier, according to the median of estimates from six analysts and two plantation companies. Output probably fell 7.9 percent to 1.74 million tons, while exports dropped 3.6 percent to 1.6 million tons, the median of estimates from five of the respondents showed. The Malaysian Palm Oil Board is scheduled to release the monthly data on Jan. 10.

Futures fell 23 percent last year, the worst annual slump since the financial crisis in 2008, as reserves built up for five months to November, trimming revenues at producers such as Sime Darby Bhd. Demand cooled amid concerns over Europe’s debt crisis and a slowdown in China, the biggest cooking oil consumer. Malaysia changed its export-tax structure to help cut the reserves, resulting in the tariff for January falling to zero.

“The zero tax bracket is likely to encourage CPO exports in the coming days,” said Nagaraj Meda, chairman of Hyderabad, India-based Transgraph Consulting Pvt., referring to crude palm oil by its initials.

Export Tax

Palm oil for March delivery dropped for a third day, losing 2 percent to 2,418 ringgit ($794) a ton on the Malaysia Derivatives Exchange, the lowest price at close since Dec. 21. Futures have recovered 9.1 percent after slumping to 2,217 ringgit on Dec. 13, the lowest level for the most-active contract since November 2009.

The Malaysian government said in October it would cut the export tax to between 4.5 percent and 8.5 percent, from 23 percent, effective Jan. 1. The tariff for this month was set at zero as the base price was below the minimum threshold of 2,250 ringgit a ton that triggers the 4.5 percent rate.

Stockpiles on Jan. 1 may climb to 2.7 million to 2.8 million tons Dorab Mistry, director at Godrej International Ltd. said Nov. 30, revising a previous call of 3 million. Rabobank International picked palm oil as the best-performing agricultural commodity for this year, betting reserves will decrease as demand rebounds.

Production typically peaks from July to October, and then tapers off in November, with January and February normally recording the lowest output. The survey estimate for output in December is 17 percent higher than a year ago. Exports also usually drop during the Northern Hemisphere winter months as the tropical oil clouds in cooler temperatures.

“Prices are already creeping up towards the expectation that production is going to drop in January, so I think the next couple of months should be positive for prices,” said Arhnue Tan, an analyst at Alliance Research Sdn. in Kuala Lumpur. Palm may reach 2,800 ringgit a ton in the first quarter, she said.

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