Malaysian Palm Reserves, Production Gains Miss Estimates

Palm oil stockpiles and output in Malaysia, the world’s second-largest producer, increased less than analysts’ expectations last month. Prices of the most-consumed cooking oil jumped to a one-month high.

Inventories rose 7 percent to 1.78 million metric tons from August, the highest level since May and the biggest jump since September last year, according to data from the Malaysian Palm Oil Board. Output gained 10 percent to 1.91 million tons, the highest since October last year. That compares with the median estimates of 1.89 million tons for reserves and 2 million tons for output in a Bloomberg survey published last week. Exports rose to 1.61 million tons, above the estimated 1.55 million tons.

Futures declined to an almost four-year low in July on prospects for expanding global supplies. Prices have since rallied on sustained demand from overseas buyers and as worsening conditions threatened the U.S. soybean crop, crushed to make a substitute oil. Palm, used in everything from candy to biofuel, is produced year-round with supply accelerating in the second half because of growing cycles.

“Stockpiles have come below expectations and that should strengthen prices,” said Ben Santoso, an analyst with DBS Vickers Securities Pte., by phone from Singapore. “The market is still waiting to see a seasonal peak and yields to recover.”

One-Month High

Palm for December delivery advanced as much as 1 percent to 2,392 ringgit ($748) a ton on the Bursa Malaysia Derivatives, the highest since Sept. 9, as the market resumed trading after the midday break when the data was released. Futures, which were at 2,386 ringgit by 4:24 p.m. in Kuala Lumpur, have rallied 12 percent since reaching 2,137 ringgit in July, the lowest price since October 2009. Soybeans have rebounded 11 percent since reaching a 19-month low in August.

Palm oil shipments from Malaysia advanced 17 percent to 542,274 tons in the first 10 days of October from the same period last month, surveyor Intertek said today. Malaysian palm oil board data showed exports rose 5.2 percent in September, rising for a fourth straight month.

Prices are still heading for a third annual loss, the worst run since at least 1996. Global palm oil production will advance 5 percent to a record 58.1 million tons in 2013-2014, boosting stockpiles by 17 percent to an all-time high of 9.2 million tons, the U.S. Department of Agriculture estimates.

“We are still concerned about increasing production in October,” said Santoso, who expects palm to average 2,300 ringgit in the fourth quarter.

World production of soybeans will jump 5.3 percent to 281.7 million tons in 2013-2014 as U.S. recovers from a drought last year and Brazil heads for the biggest crop ever, making it the largest producer, according to the USDA.

“As supplies in other oilseeds becomes more comfortable from this season, it will be difficult for palm oil prices to rally,” Macquarie Group Ltd. said in an Oct. 4 report. Futures will average 2,368.5 ringgit a ton in 2013 from 2,867.3 a year earlier, the bank said. “A broad recovery across all major oilseeds will once again result in inventory build-up.”

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