Palm oil output in Malaysia surged by the most in 10 months in July, beating analysts’ expectations, while reserves in the world’s second-largest supplier stayed near a two-year low, official data showed. Futures declined.
Output gained 18 percent to 1.67 million metric tons, the biggest jump since September, according to data from the Malaysian Palm Oil Board. That’s more than the median estimate in a Bloomberg survey for 1.56 million tons. Inventories were 1.66 million tons, 1 percent higher than in June, which was the lowest level since March 2011, and in line with the survey median of 1.65 million tons. Shipments gained 0.5 percent to 1.42 million tons, while imports rose 57 percent to 50,173 tons.
Prices of the most-consumed cooking oil declined to the lowest level in more than three years last month after dropping for five quarters, the worst run since at least 1995, as supplies are beat demand. While palm is produced year-round, output typically accelerates in this half because of growing cycles. Malaysia and Indonesia are the biggest producers.
“The worry is that the seasonal high-production cycle is already on the way and that for the next few months, excluding August, we could see production go higher,” said Ivy Ng, an analyst at CIMB Investment Bank Bhd. “Prices will fail to really make much headway.”
Palm oil for October delivery dropped 0.3 percent to close at 2,290 ringgit ($698) a ton on the Bursa Malaysia Derivatives. Futures touched 2,137 ringgit on July 26, the lowest level for a most-active contract since October 2009.
Output in August may be flat or slightly lower on fewer working days because of the Eid festival last week, while exports may also be unchanged, Ng said.
Shipments from Malaysia advanced 18 percent to 417,414 tons in the first 10 days of August from the same period last month, Intertek said Aug. 12. Exports surged 26 percent to 421,337 tons, according to SGS (Malaysia) Sdn.
World stockpiles of the oil that’s used in everything from candy to biofuel will surge 21 percent to a record 9.7 million tons by the end of 2013-2014, while demand expands 4.6 percent, the least in 12 years, the U.S. Department of Agriculture says.