Palm oil futures jumped to a five-month high after Malaysian
stocks were shown rising by less than many analysts had expected, sapped by
unexpectedly high exports, boosted by Chinese orders.
Kuala Lumpur-traded palm oil futures for November touched
2,815 ringgit a tonne, the highest for a benchmark contract since late March, before
easing back to 2,803 ringgit a tonne in late deals, a rise of 1.5% on the day.
The gains followed the release by the Malaysian Palm Oil
Board sector regulator of data showing that the country's palm oil stocks came
in at 1.94m tonnes last month.
While up 157,000 tonnes month on month, and the highest in
18 months, the stocks estimate was below the roughly 2m-tonne figure that
commentators that Agrimoney.com spoke to expected.
Production last month fell 0.9% to 1.83m tonnes – a small
fall, but an unusual one given that output is on its way to a seasonal peak in
Indeed, it was the first month-on-month fall in five years
in August palm oil output in Malaysia, the second-ranked producer of the
vegetable oil, after Indonesia.
However, this was a reflection of an unusually strong July
output figure, in turn a reflection of a shortfall in June.
Alan Lim at Kuala Lumpur-based MIDF said that in July there "more
fruit available for harvesting" thanks to a knock-on effect from June, when an
exodus of Indonesian workers back home, to celebrate religious holidays, meant
trees went uncropped.
Malaysia's palm oil exports, meanwhile, rose nearly 90,000
tonnes month on month in August to 1.49m tonnes, a one-year high, and ahead of
market expectations of 1.42m tonnes, according to a Reuters survey.
The increase was down largely to "Chinese buying ahead of festival
season", Ivy Ng, head of Malaysia research at broker CIMB, told Agrimoney.com,
with China to celebrate its National Day and Mid-Autumn festivals from October
Ms Ng also flagged stocking ahead of October's Hindu Diwali
Separately, data from cargo surveyors reported a further rise
in Malaysian exports during the first 10 days of September, by 6.9% month on
month according to ITS, and by 9.3% month on month according to SGS.
Indeed, Ed Hugo at broker VSA Capital flagged the potential
for further support for Malaysian shipments from China and India, saying that "exports
are expected to be stronger in the near-term due to the Diwali and Mid-Autumn
festivals in October".
However, the market's key debate remains about how high
production will reach at this year's seasonal peak, and whether this will be enough
to reverse a rally in palm oil futures which are now up more than 15% from a
low three months ago.
Mr Hugo said that output data for July and August indicate
that some fears for production "have not yet been realised to the extent that
some were forecasting".
And MIDF's Alan Lim flagged further upside to production to
come, but added that this would "not have a major impact on prices" thanks to
the extent of the discount that futures in palm oil already have to those in
rival soyoil, as traded in Chicago.
Nonetheless, CIMB's Ivy Ng underlined the importance of a
shortage of plantation workers in Malaysia's output fortunes.
"The most important issue on whether production reaches as
much as some expect is probably the labour issue," Ms Ng told Agrimoney.com,
flagging reports of plantations being "up to 20% short of labour, compared with
their optimal level.
"Plantations are hoping to resolve the situation," equivalent
to a shortfall of 8,000 workers.
"But they have some way to go to get to the optimal level."