A loader piles up harvested oil palm fruit outside the processing mill at the Bell Eco... Read More
Reserves jumped 16 percent to 1.95 million metric tons from 1.68 million tons in July, according to the median of six estimates from planters, analysts and traders compiled by Bloomberg. That’s the biggest increase since September 2012 and the highest level since December, Malaysian Palm Oil Board data show. Production advanced 13 percent to 1.88 million tons, the highest since October, the survey showed. The board is scheduled to release the figures on Sept. 10.
Palm, used in food, detergents and
biofuels, tumbled into a bear market in July on swelling global supplies of edible oils, including a record U.S. soybean harvest. Prices risk tumbling further to approach output costs, according to Dorab Mistry, director at Godrej International Ltd. To help boost shipments and curb stockpile expansion, the Malaysian government scrapped an export tax yesterday for two months.
“Harvesting activities increased in August, causing the double-digit growth in production,” Alan Lim, an analyst at Kenanga Investment Bank Bhd., said by phone in Kuala Lumpur. “Soybean oil production was higher than expected and caused prices to decline, making palm oil less competitive.”
Shipments fell for a second straight month, down 4.8 percent from July to 1.38 million tons, the survey showed. Sales retreated to 1.29 million tons in August from 1.35 million tons a month earlier, surveyor Intertek says.
Tax Scrapped
Exports in September and October will not attract a levy, the Ministry of Plantation Industries and Commodities said in a statement. The tax was set at 4.5 percent for September. The tariff exemption will increase sales by 600,000 tons and help contain reserves at 1.6 million tons by year-end, it said.Futures in Kuala Lumpur declined as much as 1.7 percent to 1,995 ringgit ($627) a ton today, the most since Aug. 29, before settling at 2,025 ringgit. Palm plunged to 1,914 ringgit on Sept. 2, the lowest since March 2009. Prices at a five-year low may be near a bottom in part because demand is increasing from importers in Europe, Oil World said Sept. 2.
“Almost all negative news has been priced in,” Lim said. Palm below 2,000 ringgit will boost demand from biodiesel producers in Malaysia and Indonesia, he said.
World Supplies
Palm may rally as early as October as demand improves and record supplies of soybeans are absorbed, according to Franki Anthony Dass, executive vice president at Sime Darby Bhd., the biggest listed producer by market value. Prices may rise to as much as 2,400 ringgit late in the fourth quarter as users rebuild reserves and biofuel demand increases, Ivy Ng, an analyst at CIMB Investment Bank Bhd., said in an Aug. 24 report.While demand prospects may improve in the fourth quarter, the record U.S. soybean crop and abundant vegetable oil supplies will limit gains, Rabobank International analysts including Pawan Kumar said in a report Sept. 1. The bank cut its forecasts to 2,250 ringgit from 2,500 ringgit for the fourth quarter and to 2,300 ringgit from 2,600 ringgit for the first quarter.
Soybean oil’s premium to palm has averaged $93 a ton this year, compared with $244 in 2013, data compiled by Bloomberg show. Soybean oil in Chicago slumped to 31.75 cents a pound on Sept. 3, the lowest level since March 2009, while soybeans fell to $10.0125 a bushel yesterday, the lowest since September 2010.
The soybean harvest in the U.S., the world’s top grower, will reach a record 3.816 billion bushels this year, the U.S. Department of Agriculture forecast on Aug. 12. World reserves before the start of the 2015 Northern Hemisphere harvests will rise to 85.62 million tons, the highest ever, the USDA said.
Aug. 2014 (Survey) July 2014 (MPOB) Aug. 2013 (MPOB) Output 1.88 1.67 1.74 Stockpiles 1.95 1.68 1.67 Exports 1.38 1.45 1.53 Imports 0.011 0.013 0.0075 Figures are in millions of tons. NOTE: Import figure is the median of five estimates.
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