Indonesia Palm Exports Rising to Four-Month High on Ramadan

Palm oil shipments from Indonesia, the largest producer, probably climbed to the highest in four months in April on rising demand for the Muslim fasting month of Ramadan. Futures jumped to a two-week high.

Exports increased 3.4 percent from March to 1.85 million metric tons, according to the median of five analyst, trader and grower estimates compiled by Bloomberg. That would be the highest level since December, Indonesian Palm Oil Association data show. Output rose 12 percent to 2.35 million tons, while reserves fell 4.8 percent to 2 million tons, the survey showed.

Communal meals during Ramadan, which starts in June this year, typically boost consumption of the edible oil. That may bolster futures in Kuala Lumpur, which have slumped 11 percent from an 18-month high in March. Shipments from Malaysia, the second-largest supplier, jumped 28 percent in the first 10 days of May, according to Intertek, a surveyor. Indonesia, the most populous nation in Southeast Asia, and Malaysia are both majority Muslim countries.

“Demand is increasing,” said Derom Bangun, chairman of the Indonesian Palm Oil Board, a refiners and growers group. “Processors are preparing and will further build up their inventories, not only for exports, but to meet rising local consumption for the fasting month.”

Futures rose 0.5 percent to settle at 2,604 ringgit ($809) a ton on the Bursa Malaysia Derivatives, the highest level at close since April 30. Prices reached 2,916 ringgit on March 11, the highest since September 2012, on speculation that drought in the first quarter will reduce supplies.

Weather Risk

The dry spell will probably curb production this year, said Bangun, who manages plantations in North Sumatra province. Output typically starts to increase in March after declining in the first two months of the year because of growing cycles, and lasts till September.

More damage is expected next year if the El Nino weather pattern emerges later in 2014, Bangun said. El Ninos can parch parts of Asia while bringing rains to South America.

Forecasters are strengthening predictions for the arrival of an El Nino in 2014, and Australia’s Bureau of Meteorology said this month that the event may start in July. Goldman Sachs Group Inc. and Barclays Plc have listed palm oil among crops that could be hurt by the weather pattern.

The emergence of an El Nino in the second or third quarter will affect production in 2015, according to Franky Widjaja, chief executive officer of Golden Agri-Resources Ltd., Indonesia’s largest producer. Output this year would be 5 percent to 10 percent less than the company’s 30 million-ton estimate, Widjaja said on May 5 in Jakarta.

Global palm oil imports will pick up in the second quarter as demand increases before Ramadan, Oil World said in a report last month. Purchases will rise to about 10.5 million tons in the April-June quarter from 9.6 million tons in the first quarter, the Hamburg-based researcher said.

The Indonesian Palm Oil Association, which doesn’t publish output and inventories data, may release April export figures next week. Comparisons for production and reserves are based on earlier surveys.

Before it's here, it's on the Bloomberg Terminal.