Palm Reserves Seen Falling for Sixth Month as Exports Rise

Palm oil inventories in Malaysia, the largest producer after Indonesia, probably contracted for a sixth month in June to the lowest level in a year, according to a Bloomberg survey of growers and analysts. Futures climbed.

Reserves fell 3.7 percent to 1.75 million metric tons, the least since June 2012, compared with the month before, the median of estimates from two plantation companies and four analysts showed. Output rose 6.2 percent to 1.47 million tons and exports gained 4.1 percent to 1.47 million tons, the survey showed. Imports expanded 4.7 percent to 50,000 tons, according to the median of five estimates.

Palm oil has lost 25 percent over the past year as supply of the most-used cooking oil outpaced demand. There is a risk that reserves in Malaysia may rebound with higher production in the second half, according to Rabobank International. Official data from the country’s palm board are due on July 10, including shipments to India and China, the largest importers.

“I do expect prices to have a support because if the stockpiles come down, then obviously there’s more demand,” Ben Santoso, an analyst at DBS Vickers Securities Pte., said from Singapore. “But we have yet to see what the stockpiles in China and India are, because we want to make sure it’s not just a transfer from the producing to the consuming countries.”

Indian Stockpiles

India’s cooking oil stockpiles were 1.98 million tons on June 1 from 1.69 million tons a year earlier and a record 2.12 million tons in March, according to the Solvent Extractors’ Association of India. Inventory in China was 1.28 million tons in the week to June 28 from a record 1.6 million tons in May, according to Shanghai Pansun Cereals & Oils Development Co.

Palm oil for delivery in September advanced 0.2 percent to 2,370 ringgit ($744) a ton on the Bursa Malaysia Derivatives, the highest level at close for the most-active futures since June 26. Prices touched 2,491 ringgit on June 20, the highest since March 25, on demand before the Muslim fasting month of Ramadan in July, when communal meals lift total usage.

“Normalizing demand from India and Bangladesh after Ramadan will be neutralized by lower production due to tree stress,” said Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd. Output may also be affected during the Eid festival season in August when laborers go on holiday, he said.

The median estimate in the survey for output in June was in line with 1.47 million tons a year ago, according to data from the Malaysian Palm Oil Board. Production typically is highest from July to October each year.

Mistry’s Outlook

Palm oil may decline to 2,200 ringgit by the end of the year, according to a separate Bloomberg survey of 13 trader, producer and analyst estimates that was published on June 25. Dorab Mistry, a director at Godrej International Ltd., said that he’s bearish on prices after July as output expands.

Demand should increase in the coming months ahead of Eid, Mid-Autumn and Diwali festivities, Santoso and Quah He Wei wrote in a report on July 1. After that, stockpiles in Malaysia may rebound toward 2.1 million tons by December as output from the peak-harvesting season kicks in, they said.

        June 2013 (Survey)    May 2013 (MPOB)   June 2012 (MPOB)
Output          1.47               1.38               1.47
Stockpiles      1.75               1.82               1.70
Exports         1.47               1.41               1.55
Imports         0.05               0.048              0.14
Figures are in millions of tons.