Palm oil futures hit a nine-month low after Malaysia revealed a bigger-than-expected rise in its inventories of the vegetable oil – driven by the biggest annual drop in exports since at least 2010.
Malaysia’s palm oil stocks rose by 126,000 tonnes last month to 1.78m tonnes, their first rise since November, according to data from the Malaysian Palm Oil Board.
The increase, which was some 9,000 tonnes above the level investors had forecast, came despite a far smaller import figure than the market had expected.
However, production, up 168,000 tonnes month on month at 1.53m tonnes, was a little higher than traders had thought, with a seasonal rise in output supercharged by some recovery in plantations from damage fosters by El Nino-caused dryness.
And exports from Malaysia, the world’s second-ranked shipper after Indonesia, tumbled by 150,000 tonnes month on month to 1.13m tonnes – nearly 70,000 tonnes below the level that investors had expected.
Year on year, Malaysian exports fell by one-third in June, the biggest drop on data going back to 2011.
The impact on Kuala Lumpur futures was to send the September contract to 2,198 ringgit a tonne at one stage, the lowest for a benchmark contract since September last year.
They recovered a little to stand at2,209 ringgit a tonne in late deals, down 1.4% on the day.
And lower prices yet might be in store, said Ivy Ng, deputy head of Malaysia research at broker CIMB, citing the potential for a further revival in output from levels depressed by the El Nino, which has a history of causing undue dryness in South East Asia.
“In the second half of the year, production will likely see a seasonal rise, and secondly see improvement as the effects of El Nino pass through,” Ms Ng told Agimoney.com.
‘Prices need to come off’
Against this backdrop, palm oil prices have needed to decline “compared against soybean oil, to win back demand”, Ms Ng said.
Indeed, “some people are suggesting Africa, Chinese, Indian demand has not so robust has had been expected”, she said, flagging talk of some destocking by buyers too.
“I think prices need to come off to attract additional demand,” although the decline in values may not happen overnight.
“I think traders will adjust prices, and then see how exports work out.”
(Source – http://www.agrimoney.com/news/tumbling-malay-exports-send-palm-prices-to-9-month-low–9738.html)