KUALA LUMPUR: Malaysia’s palm oil stockpiles at the end of January are forecast to fall from the previous month’s record high as production eases and exports increase, according to a Reuters survey.
Falling inventories will add to the recovery in benchmark palm oil prices since last November when they fell to their lowest in three years. Palm futures were up 1.6% at RM 2,342 (US$574.58) a tonne at the midday break on Thursday, the highest since June 29.
Stockpiles in Malaysia, the world’s second-largest producer of the edible oil, are forecast to fall 4.7% from the previous month to 3.07 million tonnes, based on the median estimate of eight planters, traders and analysts.
This would be the first month of inventory declines after seven gains. In December, stocks rose to 3.22 million tonnes, a record high according to data on Refinitiv Eikon going back to January 2000.
“Exports are crucial in determining stocks,” said a planter in the eastern Malaysian state of Sabah, adding that anticipated production declines in the first quarter of the year will contribute to an inventory drawdown in the coming months.
“This is also a low seasonal production period, and with February being the Lunar New Year month, production may still fall,” he said, referring to the national holiday when palm workers typically take extended leave.
In January, production is forecast to ease for a third straight month, down 10.9% from December to 1.61 million tonnes, according to the poll.
Palm oil production typically falls during the first quarter of the year. Additionally, the poll also showed Malaysia’s January palm exports rising 12.4% from December to 1.56 million tonnes on stronger demand from Europe.
“The better than expected recovery in exports was due to stronger demand from European Union countries,” said Ivy Ng, regional head of plantations research at CIMB Investment Bank.
Official palm oil data will be published by the Malaysian Palm Oil Board after 0430 GMT on Feb 11. The median results from the Reuters survey put Malaysia’s consumption in January at 280,515 tonnes.