Malaysia palm oil stockpiles may surge to largest in three years

PALM oil inventories in Malaysia likely climbed to their biggest in nearly three years after rising production in the world’s second-largest grower outpaced a recovery in export demand.

Stockpiles jumped about 8 per cent in September from a month earlier to 2.26 million tons, according to the median of 10 estimates in a Bloomberg survey of analysts, traders and plantation executives. That would be the fourth straight monthly increase, lifting reserves to their highest since October 2019.

Bulging inventories and accelerating production have overshadowed robust shipments from Malaysia, spurring the worst quarterly slump in prices since 2008 and providing some relief for world food inflation. Mounting concerns that a global recession will curb edible oil demand are also pressuring futures, even as the weak ringgit makes the oil more attractive to price-sensitive buyers.

Malaysia’s production rose about 2.3 per cent in September to a two-year high of 1.77 million tons, the survey showed, slowing from a 10 per cent increase in August. Exports were seen jumping 7.7 per cent to 1.40 million tons, the strongest since December.

Palm oil will remain volatile, said Sathia Varqa, owner of Palm Oil Analytics in Singapore. “Rising supplies and macro headwinds are stacked against favourable export conditions of low cash offers, palm’s wide discount to rival vegetable oils, the weak ringgit and declining freight rates,” he said. Prices may swing between 3,300 ringgit (S$1,020) and 3,700 ringgit a ton in October. Futures for December delivery traded at 3,596 ringgit on Tuesday (Oct 4).

More details from the survey:

SEE ALSO

Asian farmers plant to boost palm oil output, seedling shortage slows pace

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

• Stockpile estimates range from 2.18 million to 2.38 million tons, while production ranged from 1.73 million to 1.78 million tons
• Export forecasts are from 1.32 million tons to 1.48 million tons
• Imports may fall to around 100,000 tons from 145,452 tons in August
• Local consumption estimates range from 230,000 to 300,000 tons

NOTE: September 2022 numbers, in million tons, are based on the median of 10 estimates. The Malaysian Palm Oil Board will release official stockpiles, production and export data on Oct 11. BLOOMBERG