Malaysia: Malaysia's palm oil inventory

Palm oil stocks fell by 11.4 % in April from 2.17 million tons in March, said the Malaysian Palm Oil Board (MPOB) in its new monthly release. Malaysia's palm oil inventory finally eased to 1.93 million tons in April next staying above the 2-million-ton threshold for the completed 10 months, which had led to concerns that crude palm oil (CPO) prices would likely be dragged down further.

As at end-December 2012, local palm oil stocks had soared to an amount-time high of 2.63 million tons.

A trader told StarBizWeek that the imposition of the Government's new CPO export tax structure early this year, which saw a tax cut in the range of between 4.5 % and 8.5 % from 23 % formerly(unchanged since 1970s), was a good measure to curb the rising record palm oil stocks.

In January and February, zero business was imposed on local palm oil exports, but this was raised to 4.5 % in March and April. The CPO export business for June is expected to be announced on Wednesday.

On an extra note, MPOB said exports declined 5.6 % to 1.45 million tons in April from 1.54 million tons a month formerly.

“The April export figure is one of the lowest monthly figures this year and is likely to remain weak in the following months, as the stronger ringgit makes local CPO pricier, particularly to price-sensitive major export markets like China and India,” said the trader.

Bloomberg reported yesterday that China Cereals & Oils Business Net said palm oil inventories in China, the second-biggest importer, rose to a record, as inbound shipments outpaced consumption.

Stockpiles at coastal ports exceeded 1.5 million tons, compared with 1.46 million tons a month ago.

High inventories may begin to slow China's purchases and weigh down prices, which have fallen 4.8 % on Bursa Malaysia Derivatives this year, next slumping 23 % in 2012.

Industry observers opined that the new high palm oil inventories in China and India may put pressure on both CPO prices and exports in the coming months.

CPO production for the month under review, meanwhile, increased marginally by 3.12 % to 1.37 million tons from 1.33 million tons in March.

“The higher production in April is within expectations, following the end of the low CPO production season in the prime quarter and the start of the traditional high production season in the second quarter,” said analysts.

JF Apex Securities in its new plantation sector statement said positive news on the lower palm oil inventory in April had failed to excite the palm oil market, as concerns over lower soybean prices continued to cloud the pricing for the oil.

“From presently on, data of the palm oil inventory falling below the 2 million-ton threshold and stronger request in the month of Ramadan (in July) shall provide momentum to CPO prices,” it added.

Plantation companies, incidentally, are due to statement their quarterly results by the end of this month.

The research unit expects weaker earnings on a sequential quarterly basis, as “planters are suffering from weaker CPO production in the prime quarter of 2013”.

It said planters could as well statement slightly negative results on a year-on-time(y-o-y) basis, as the significant lower CPO price, down by 27 % y-o-y, may additional than offset the recovery in CPO production.