Agricultural commodity markets received a, rare, slice of
bullish news when Malaysia's palm oil inventories were revealed to have fallen
to a one-year low in June, with some upbeat export data for this month too.
Palm oil stocks in Malaysia, the second-ranked producer of
the vegetable oil after Indonesia, fell 10.0% month on month in June to 1.66m
tonnes, the Malaysia Palm Oil Board, the sector regulator, said.
The decline reflected in part a drop of 5.3% in production from
May, at a time of year when output is typically increasing, but seen by
investors as a sign that dry weather earlier in the year had indeed affected
Exports rose 5.3% to 1.48m tonnes, a little above market
expectations, helped by demand ahead of the ongoing Ramadan festival.
And Malaysia's palm exports remained buoyant in the first 10
days of July, separate data from cargo surveyors showed, with Intertek putting
the rise at 14.1%, and Societe Generale de Surveillance at 18.7%.
Both inspection groups saw cargos to China as particularly
strong, with those in India rising too.
Meanwhile, there are expectations too that July will unveil
another soft production performance, given the onset of Ramadan, for which many
of Malaysia's increasingly Indonesian palm workforce return home.
"For July, we would expect weak production once more as
Ramadan, from June 28 to July 27, reduces the number of harvest hours," said
Edward Hugo at broker VSA Capital.
Mr Hugo added that Thursday's data "should be seen as very
positive for palm oil pricing, and with the prospect of another fall in
production and even stronger exports in July, this should provide further
However, "as always, the prospect for a large, high quality
US soybean crop will likely temper any potential gains".
Indeed, grain and oilseed markets have extended declines this month on expectations for record US soybean and corn crops, with improved results from the US wheat harvest adding to the downbeat mood.
Palm oil for September recovered from a nine-month low of 2,349
ringgit a tonne reached ahead of the data to settle at 2,386 ringgit a tonne in
Kuala Lumpur, a gain of 0.5%.