Malaysia’s end-June palm oil stocks likely dropped to their lowest in a year as demand for the edible oil continued to outstrip supply, a Reuters survey of five plantation companies showed on Thursday.
Inventory levels may have eased 4.2 per cent from a month ago to 1.74 million tonnes in June, which would be the sixth straight monthly decline.
Output in the world’s second largest palm oil producer likely rose six per cent in June from the previous month, its biggest jump so far this year, to 1.47 million tonnes, suggesting the start of a higher production cycle in the second half of the year.
Production, however, still fell short of the 1.59 million tonnes of total demand represented by exports and local consumption.
Shipments rose 2.7 per cent to 1.45 million tonnes in June, as buyers from India and Pakistan stocked up in preparation for the Muslim festival of Ramadan in July.
China, the world’s largest palm oil buyer after India, also purchased more volumes last month, cargo surveyor data showed.
The median of the figures provided by the poll respondents imply domestic consumption in June of around 143,751 tonnes.
Malaysia’s imports of crude palm oil from top producer Indonesia most likely gained to 50,000 tonnes in June from 15,815 tonnes in the previous month, according to the poll.
The Bursa Malaysia Derivatives Exchange’s palm oil benchmark futures slipped in June after the US Federal Reserve signalled it would begin to dial down stimulus this year, although a weak ringgit and Ramadan demand capped some losses.
Traders said easing demand post-Ramadan and rising production in the second half of the year could mean stocks would start picking up again in July, further depressing prices.
Palm oil prices are set for a sharper-than-expected 15 per cent drop this year as the oilseed faces slowing demand in key markets such as Europe and Asia and increased competition from rival soyoil, a Reuters poll showed.
The recent smog that choked Malaysia and Singapore has put planters under scrutiny and raised calls to cut reliance on unsustainable palm oil, which could add pressure on prices.
Indonesia, the world’s top palm oil producer, set its export tax for crude palm oil at 10.5 per cent for July, up from nine per cent in June, while Malaysia kept its tax rate unchanged for the fifth month at 4.5 per cent.