Palm Oil Imports by China Set to Slow as Soy Shipments Surge

Palm oil imports by China, the second-biggest buyer, are poised for the slowest expansion in three years, at a time when record production fuels a global glut, a Bloomberg News survey shows. Prices fell.

Inbound shipments in the 12 months that began Oct. 1 are likely to remain about the same as the 6.6 million metric tons bought last year, according to the median seven estimates from researchers and traders in China. Two forecast growth and one projected a decline.

Rising purchases of soybeans that are crushed to produce feed meal for China’s growing livestock herds are also boosting the nation’s vegetable oil output, at the expense of palm from exporters including Indonesia and Malaysia, Leon Xia, an analyst at Shanghai JC Intelligence Co., said yesterday. The U.S. Department of Agriculture forecasts inventories to reach a record in 2013-2014.

“China’s demand for cooking oil has stabilized, even as soybean imports continue to grow to satisfy the need for protein feed for livestock,” Liu Xianwu, the general manager of Beijing-based researcher China Cereals & Oils Business Net, said yesterday. “There’s steady demand for the cheaper palm oil, but fundamentally it’s not changing much.”

Palm oil for delivery in January fell for the first time in three days on Bursa Malaysia Derivatives, declining as much as 0.3 percent and traded at 2,434 ringgit ($766) at 1:29 p.m. in Kuala Lumpur. Futures, which closed at the highest price since Sept. 6. yesterday, dropped 5.6 percent in the last 12 months as output increased in Indonesia and Malaysia, the biggest producers.

Indonesian Output

The USDA estimates Indonesia’s production at a record 31 million tons for 2013-2014. World output will advance 5 percent to 58.1 million tons, boosting stockpiles by 17 percent to an all-time high of 9.2 million tons, according to the agency.

“Malaysian palm oil is quite dependent on exports to China,” said Arhnue Tan, an analyst with Alliance Investment Bank Bhd. “If there is any slowing of exports, that could mean a build-up of supplies in Malaysia.”

Imports of soybeans by China in the 12 months that started Oct. 1 will probably expand 8.3 percent to 65 million tons, yielding an additional 1 million tons of oil, Liu said.

Refined palm oil for May delivery declined 0.5 percent to 6,124 yuan ($1,005) a ton on the Dalian Commodity Exchange and soybean oil retreated 0.7 percent to 7,208 yuan.

Soybeans for delivery in January lost 0.4 percent to $12.96 a bushel on the Chicago Board of Trade, while soybean oil for December fell 0.4 percent to 41.50 cents a pound.

China is the biggest importer of soybeans. It’s ranked No. 2 in palm oil purchases behind India.

— With assistance by William Bi

(Adds price impact in 1st, 5th paragraphs)
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