Battered palm oil prices managed a positive close, underpinned
by talk of government action to support the market, despite data showing
Malaysia's inventories had set a record even more convincingly than investors
Malaysia's palm oil stocks soared 17.4% last month to an
all-time high of 2.48m tonnes, a rise even stronger than analysts had expected,
data from the Malaysian Palm Oil Board, the official regulator, showed.
The increase reflected both a bigger-than-forecast rise in
output, to 2.00m tonnes, and a weaker-than-expected increase in export demand,
with shipments reaching 1.51m tonnes.
And data from cargo surveyors showed a drop in Malaysian palm
exports so far this month, although Societe Generale de Surveillance, pegging
the drop at 8.7%, and Intertek, at 1%, disagreed over the extent of the
However large the drop, it showed that "right now, there is
no evidence" of a slump of more than 20% in prices from a late-August high to a
three-year low last week stimulating demand from importers, Rabobank commodity
analyst Erin FitzPatrick said.
Nonetheless, Kuala Lumpur's benchmark palm oil futures
contract recovered early losses to end 0.8% higher at 2,457 ringgit a tonne.
The revival was sparked in part by hopes that Malaysia will
review its export taxes, to render its shipments more competitive with those of
Indonesia, the top-ranked palm oil producer.
Malaysia palm oil data, Sept change on month and (on market forecasts)
Output: 2.004m tonnes, +20%, (+0.4%)
Exports: 1.506m tonnes, +4.5%, (-0.3%)
Stocks: 2.481m tonnes, +17.4%, (+0.7%)
Sources: MPOB, ThomsonReuters
Furthermore, Bernard Dompok, Malaysia's plantations
industries and commodities minister, who met his Indonesian peer on Monday,
signalled joint action from by countries to underpin prices.
While failing to specify measures being considered, Mr Dompok's
comments have raised hopes of measures to tackle the rise in supply as well as
demand, with talk of measures such as encouraging tree replantings, so reducing
temporarily the extent of productive plantations.
Palm oil futures "regained strength on the positive note
that Malaysia and Indonesia will try to limit production as measure to boost
prices", Ker Chung Yang, at Singapore-based broker Phillip Futures, said.
The rise in Malaysian palm production reflected a rise in
oil yield to 0.41 tonnes per hectare, the highest since 2009, and representing
the first time this year that the result has risen above five-year average
levels, according to Rabobank.
Meanwhile, demand is set to "remain lacklustre" thanks to an
improved outlook for oilseed production in India, a major palm importer, and "uncertainty"
over growth in Europe's biodiesel industry, amid an anti-dumping probe and
question marks over double counting allowances.
Palm oil prices look set to "remain under pressure", Ms FitzPatrick
said, adding that she was "now pessimistic" over values recovering to the
average of 2,800 ringgit a tonne in this quarter, 3,000 a tonne in the first
three months of 2013 and 3,100 ringgit a tonne in the April-to-June period that
the bank has forecast.