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KUALA LUMPUR, September 3 (Reuters) – In late August, Malaysia’s palm oil stocks hit their highest level in more than a year as production rebounded amid sharply declining exports.
Palm oil stocks rose 16.3% from July to 1.74 million tonnes, their highest level since June of last year, according to a median estimate of 10 planters, traders and analysts polled by Reuters.
The output of the world’s second-largest palm oil producer rose 11.2% to 1.7 million tonnes, peaking at its highest level in 10 months.
“Production is expected to improve in September and October following favorable weather conditions in the previous months,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.
Exports fell for a second consecutive month, falling 12.3% to 1.24 million tonnes.
“Exports are lower due to more favorable Indonesian export duty prices, but that will change for September,” said Lee Toong Huang, general manager of Kwantas Oil.
Indonesia’s main producer set its benchmark price for crude palm oil up in September, raising its export tax from $ 93 per tonne in August to $ 166 per tonne.
“The key to improving exports is Indian demand before the tariff exemption expires which ends in September,” Lee said.
The main Indian buyer, whose reduced three-month import tax rate for crude palm oil, which had made palm oil more attractive than rival soybean and sunflower oil, will end on September 30.
The marked increase in stocks will frighten traders into a selling mode, Varqa said.
“Prices should be challenged to come down from current levels as production accelerates and stocks approach 1.9-2 million tonnes in September and October,” he added.
The Malaysian Palm Oil Board will release official data on September 10.
Breakdown of August estimates (in tonnes):
* Official stocks of 1,496,460 tonnes in July plus the production and imports estimated above give a total August supply of 3,239,420 tonnes. Based on the median of exports and estimated ending stocks, Malaysia’s domestic consumption in August is estimated at 264,272 tonnes.
Reporting by Mei Mei Chu; Editing by Shounak Dasgupta
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