Palm oil prices dipped after data showed Malaysian stocks of
the vegetable oil rising faster than had been expected, topping 2.0m tonnes for
the first time in 19 months, as exports fell short of forecasts.
Palm oil stocks in Malaysia, the second-ranked producer and exporter
of the vegetable oil, rose 3.9% month on month to hit 2.02m tonnes in September,
the Malaysian Palm Oi Board.
The increase took stocks to their highest since February
2016, and was 14,000 tonnes above traders' expectations, as measured by a
And it came despite a surprise slowdown in production, which
fell for a second successive month, this time by 1.7% to 1.78m tonnes – rather than
rising to a 23-month high of 1.84m tonnes as traders had forecast.
September typically sees the seasonal peak in Malaysian palm
"Malaysian production remains up 14% year to date, bouncing
back after last year's El Niño-impacted production levels, but the rate of
year-on-year increase is decreasing as we go through the year," said Edward
Hugo, analyst at London-based broker VSA Capital.
However, the impact on stocks of a disappointing output
figure was more than offset by a weaker-than-expected export figure too, with
Malaysian shipments last month pegged at 1.52m tonnes.
While a rise of 1.8% month on month, the figure came in some
88,000 tonnes short of expectations.
Indeed, Ivy Ng, regional
head of agribusiness research at Kuala Lumpur-based CIMB, highlighted that "there
is some discrepancy" between the rate of exports identified by the MPOB and
that shown by cargo surveyors, whose data on inspections showed shipments
rising by some 10%.
The difference between the two sets of statistics "could be
down to a timing issue on how cargo surveyors and the MPOB collect their data",
Ms Ng told Agrimoney.com.
Stocks to grow
She added that the lower-than-expected Malaysian production
figure for September was depressed by the month holding three public holidays, meaning
disruptions to the plantations workforce,
In fact, "production could be higher in October than
September", she said.
While there was "probably still room" for inventories to
rise further over the next two months, "people do not expect stocks to get back
to" levels of 2.8m-2.9m tonnes seen in late 2015, before El Nino-related
dryness sapped production.
"Demand is pretty OK," Ms Ng said, flagging an average discount
of some $158 a tonne in the price of palm oil to rival vegetable oil soyoil.
Palm oil vs soyoil
VSA's Edward Hugo said that while the MPOB data "might
appear a bit bearish as we move through what may turn out to be the peak
production month for 2017, rival soyoil pricing has looked a little healthier",
boosted by worries over dryness delays to Brazil's soybean sowing season.
Also "key" to palm oil prices will be the strength of Malaysian
exports, which cargo surveyor ITS had soared 18.1% month on month in the first
10 days of September.
Nonetheless, palm oil futures for December dropped 1.5% to
2,694 ringgit a tonne in late deals in Kuala Lumpur.