Palm oil inventories in Malaysia, the largest producer after Indonesia, were probably unchanged in July at the lowest level in more than two years, according to a Bloomberg survey of growers and analysts. Futures climbed.
Reserves held at 1.65 million metric tons, the median of estimates from two plantation companies and three analysts showed. That would match inventories in June, the lowest since March 2011, according to data from the Malaysian Palm Oil Board. Output expanded 10 percent to 1.56 million tons, while exports gained 2.7 percent to 1.45 million tons, the survey showed. Imports rose 25 percent to 40,000 tons, according to the median of three estimates.
Palm oil tumbled to the lowest level in more than three years last month after declining for five quarters, the worst run since at least 1995, as global supply of the world’s most-consumed cooking oil beat demand. While palm is produced year-round, supply typically accelerates in the second half because of growing cycles, with the highest output usually in September or October. Official board data for July are due Aug. 14.
“Production will get stronger as we head to the peak season,” Ivy Ng, an analyst at CIMB Investment Bank Bhd., said from Kuala Lumpur. “Although stocks look pretty low, we don’t see prices reacting much because investors are looking to those peak months and are getting worried.”
Palm oil for delivery in October gained 0.3 percent to close at 2,246 ringgit ($693) a ton on the Bursa Malaysia Derivatives. Prices touched 2,137 ringgit on July 26, the lowest for the most-active contract since October 2009.
World stockpiles of the oil that’s used in everything from candy to biofuel will surge 21 percent to a record 9.5 million tons by the end of 2013-2014, while demand expands 4.4 percent, the least in 12 years, U.S. Department of Agriculture forecasts show. Rising supplies of soybean oil, an alternative, will add to the glut, with U.S. growers set to reap their biggest-ever crop of soybeans from September, according to the USDA.
The median estimate in the survey for output in July was about 8 percent lower than the 1.69 million tons a year ago, according to data from the board. Last year, production jumped 15 percent in July from a month earlier.
“I expect stocks to rise, but not at a fast pace because the seasonal uptick in production seems a bit slow this time around,” Alvin Tai, an analyst at RHB Investment Bank, said in Kuala Lumpur. “The young trees, which are fruiting heavily, will hit their peak as usual in September, but the old ones are not doing so well.”
With China purchasing a record amount of soybeans, that could damp demand for palm oil, Tai said. China, the largest buyer of the tropical oil after India, was set to import 7.35 million tons of soybeans in July from 6.5 million tons in June, state-owned researcher Grain.gov.cn said July 5.
July 2013 (Survey) June 2013 (MPOB) July 2012 (MPOB)
Output 1.56 1.42 1.69
Stockpiles 1.65 1.65 2
Exports 1.45 1.41 1.29
Imports 0.04 0.032 0.086
Figures are in millions of tons.