Indonesian Palm Oil Exports Seen Holding Near 2-Month Low

Palm oil shipments from Indonesia, the biggest producer, were probably little changed last month from the two-month low in June as higher local prices lured importers to cheaper supplies from Malaysia. Futures rose.

The country shipped 1.62 million metric tons from 1.619 million tons in June, which was the lowest level since April, according to the median of estimates from two traders, two plantation company executives and an industry group official compiled by Bloomberg. Output rose 0.8 percent to 2.4 million tons. Reserves fell 2.1 percent to 2.35 million tons, the lowest since June 2012, the median of four estimates showed.

Futures traded in Kuala Lumpur dropped 20 percent in the past year, plunging to the lowest level in more than three years last month, as global supplies of the most-consumed cooking oil exceed demand. While that trimmed prices in Indonesia, they were still higher than those in Malaysia, the second-biggest producer.

“Indonesian CPO is at a premium over Malaysia,” said Joelianto, trading director at PT Sinar Mas Agro Resources and Technology, referring to crude palm oil by its initials. “And there’s the export tax that makes shipments even more expensive.”

The tax on shipments from Indonesia was 10.5 percent in July, according to government data compiled by Bloomberg. That was more than double the 4.5 percent rate in Malaysia. Both countries kept the rates unchanged this month and Malaysia’s customs said today the tariff would be the same for September.

The Indonesian Palm Oil Association, which doesn’t publish output and inventory figures, may release export data next week. The forecasts for changes in reserves and production in July were derived by Bloomberg compared with earlier survey findings.

Domestic Prices

Palm oil in Indonesia at Dumai and Belawan ports on a free-on-board basis dropped 5.4 percent to $750 per ton last month, while supplies for local delivery in Malaysia fell 3.2 percent to 2,290 ringgit ($699), according to data compiled by Bloomberg. Futures gained 0.9 percent to 2,339 ringgit a ton on the Bursa Malaysia Derivatives today. The most-active contract touched 2,137 ringgit on July 26, the lowest since October 2009.

World stockpiles of the oil that’s used in everything from candy to biofuel will surge 21 percent to a record 9.7 million tons by the end of 2013-2014, while demand expands 4.6 percent, the least in 12 years, the U.S. Department of Agriculture says.

While supplies will continue to rise as output typically accelerates in the second half because of growing cycles, imports may slow from the biggest buyers India and China.

Weak Demand

“The demand will probably remain weak until the year end,” said Joelianto whose company is a unit of Singapore-based Golden Agri-Resources Ltd., the second-largest palm producer.

Imports by India fell for the first time in three months in July, dropping 5.2 percent to 568,254 tons from July 2012, after a slump in the country’s currency increased costs for refiners, the Solvent Extractors’ Association of India said Aug. 14.

Output has started to climb as the peak-production period starts, said Fadhil Hasan, executive director at the association, which represents the country’s growers and refiners.

In Malaysia, exports rose 0.5 percent to 1.42 million tons in July from a month earlier, the country’s palm oil board said Aug. 14. Output gained 18 percent to 1.67 million and reserves increased 1 percent to 1.66 million tons.