Business Times Palm down on rising inventory conern

CPO FUTURES

Palm oil futures yesterday dropped for a second week on concern that rising stockpiles in Malaysia, the second-biggest producer, may damp a 45 per cent rally this year.

Output in Malaysia surged 8.5 per cent to 1.4 million metric tons in May, lifting stockpiles for the first time in six months by 5.7 per cent to 1.37 million tons compared with April, the nation’s Palm Oil Board said on June 10.

“Prices are unlikely to rise as production is recovering” in Malaysia, Sunaina Dhanuka, an analyst at Macquarie Research, said in a report. “Reports out of India suggest that imports there are likely to slow due to large stockpiles” in that country, the report said.

August-delivery palm oil dropped 0.8 per cent for the day, and 2.2 per cent for the week, to RM2,465 ringgit a metric ton on the Malaysia Derivatives Exchange.

Malaysian palm oil exports to India slowed to 2,200 tons in the first 10 days of June from 34,700 tons in the same period in May, according to cargo surveyor Societe Generale de Surveillance. Sales to India in May fell 26 per cent to 121,000 tons from April.

AmResearch warned in a report this week that there may be “unfavorable weather, which could affect output,” referring to the possible development of the El Nino weather pattern.

El Nino causes drier-than-usual conditions in many Asian countries including Indonesia and Malaysia, which account for about 90 per cent of palm oil output. More than half of annual output in the two countries usually occurs in the second half.

The US National Oceanic and Atmospheric Administration’s Climate Prediction Center warned on June 4 of El Nino conditions developing in June to August. The risk of El Nino weather this year has grown, Australia’s Bureau of Meteorology said on June 3.

US stockpiles of soybeans are likely to be at their lowest since 1977 by the end of the crop year, the US Department of Agriculture said June 10.

US stockpiles on August 31 will total 110 million bushels, down from a May forecast of 130 million and the year-earlier total of 205 million, it said.

Soybeans, crushed to produce a rival oil, have surged 29 per cent this year as smaller crops in South America boosted buying of US supplies, depressing stockpiles. The US, Brazil and Argentina are the largest producers of soybeans.