Palmoil HQ Palm oil stocks rise on higher production

Malaysia’s palm oil inventory at end-May rose 5.72% to 1.37 million tonnes from a 22-month low of 1.29 million tonnes in April, mainly due to higher production.

Year-on-year stocks, however, fell 28.7%, according to statistics released by the Malaysian Palm Oil Board yesterday.

Production, in line with market expectations, was highest year-to-date at 1.4 million tonnes in May, 8.49% higher than the 1.28 million tonnes posted the month before.

Year-to-date, production amounted to 6.5 million tonnes, 4% lower than in the equivalent period last year.

An analyst at a local research house said the seasonal higher palm oil production in the second half of the year would have a negative impact on the price of palm oil.

“Crude palm oil (CPO) should be between RM2,200 and RM2,400 per tonne for the next three to six months,” he told StarBiz, adding that demand could not offset the bigger rise in production.

However, should the potential El Nino phenomenon fully develop in Malaysia, palm oil prices may increase following an anticipated lower output.

“We can only see the impact when El Nino is fully developed. There are signs of the phenomenon coming now but it’s not confirmed,” the analyst said.

El Nino is a climatic condition where abnormal warming of the Pacific Ocean causes dry weather in South-East Asia and northern Australia.

Meanwhile, AmResearch Sdn Bhd in its sectoral report yesterday said it was natural for palm oil inventory to rise in May after falling for five consecutive months.

“We reckon that CPO prices would sustain, underpinned by unfavourable weather which could affect output in coming months, rising crude oil and soybean oil prices and a weak US dollar,” it said.

The average price of CPO was RM2,743 per tonne in May compared with RM2,387 in April.

Palm oil exports were 2.26% higher at 1.22 million tonnes in May versus 1.19 million tonnes in April. Year-on-year, exports were 1.67% higher.

Independent cargo surveyor Intertek reported that palm oil exports for the first 10 days of June were 28.35% lower at 289,437 tonnes against 403,934 tonnes in the same period in May.

In the first five months of the year, palm oil exports increased 8% year-on-year to 6.3 million tonnes, AmResearch said.

China was the main buyer of Malaysia’s palm oil, accounting for 21.5% of the country’s exports in the first five months.

According to the research house, China was the main importer of Malaysia’s palm oil in May, increasing its imports by 23% month-on-month to 319,097 tonnes.

The increase in palm oil exports to China had helped compensate for the decline in exports to Pakistan, India and the European Union, AmResearch said.