Crude palm oil stocks jumped 17.4% to a record of 2.48 million tonnes September compared with August as exports fail to keep up with production that surged to an all time high of two million tonnes .
Exports rose by 4.5% to 1.5 million tonnes last month according to Malaysian Palm Oil Board (MPOB) monthly statistic data released yesterday.
The inventory increase had exceeded expert and consensus views that expected levels of between 2.3 million tonnes to 2.4 million tonnes on the back of lacklustre shipments and growing stockpiles.
This comes after inventory levels hit its highest level year-to-date in August at 2.11 million tonnes compared with 1.99 million tonnes a month earlier.
The three-month benchmark December contract closed marginally higher at RM2,438 per tonne up RM19, as the MPOB data weigh on sentiments and clawed back its gains following comments made by Plantation Industries and Commodities Minister Tan Sri Bernard Dompok earlier.
Trading yesterday saw prices swinging both ways to reach a low of RM2,417 and a high of RM2,483.
He said the cabinet had agreed to review the CPO export tax structure and would cooperate with largest palm oil producer, Indonesia to stabilise prices.
“The cabinet had agreed to review the export tax structure for crude palm oil. I will make a presentation to the cabinet this Friday,” he said on the sidelines of the International Rubber Technology and Economic Congress.
Dompok has proposed a cut in tax to between 8% to 10% from the 23% last week, however, the exact amount of the cut would only be known upon the cabinet’s approval.
“The official level meeting would be held sometime early next month, and this would centre on the moves to support the palm oil prices,” he said. He said both countries would be looking at ways to reduce the supply of palm oil to the market at any given time, and this could be accelerated with the replanting initiative by the country.
“We can also create more alternative uses in the local market, such as increasing the biodiesel utilised in the country. If this is implemented throughout the country, we can take up about 500,000 tonnes of palm oil from the market.
“We will be financing the major oil players to build blending facilities at their depot to drive local demand for palm oil,” he said.
The Government will bear the holding cost for the rubber industry if exporters need to stop selling, in a move to support the price of SMR 20.
Meanwhile, on rubber prices, he said the price mechanism would kick in should the tyre-grade SMR20 fall below US$2.70 per kg.
“The tripartite agreement between Thailand, Indonesia and Malaysia would cut off 300,000 tonnes to the market, and the portion that Malaysia would take is at 39,000 tonnes in proportion with the rubber we produced,” he said.
The three countries had agreed in August to cut down rubber trees and trim exports by 300,000 tonnes, or about 3% of global production this year in an attempt to curb declining global rubber prices. The move came into effect on Oct 1.
The Malaysian Rubber Board’s official physical price for SMR20 closed at RM9.29 per kg yesterday.