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Malaysian palm export recovery eases market nerves

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Palm oil futures managed a steadier start to the week after data showed stronger exports, offsetting a larger-than-forecast build in Malaysian stocks of the vegetable oil.

Inventories of the vegetable oil in Malaysia, the second ranked palm producer and exporter, rose 4.6% to 1.77m tonnes last month, a far bigger increase than the 0.8% increase that investors had expected.

The bigger-than-expected increase reflected both a forecast-beating rise in production, of 3.9% month on month to 1.56m tonnes as Malaysia's output recovers from a seasonal dip, and disappointing exports.

Malaysian shipments grew 1.2% last month from March to 1.26m tonnes, below the 3.8% increase that investors had expected.

May recovery

However, July palm oil futures closed up 0.5% at 2,589 ringgit a tonne in Kuala Lumpur nonetheless after separate statistics from cargo surveyors showed exports making a far stronger start to this month.

Intertek Testing Services over the weekend pegged Malaysian shipments so far in April at 391,586 tonnes, a rise of 10.8% month on month.

And on Monday, rival Societe Generale de Surveillance estimated exports at 386,076 tonnes, a jump of 26%.

Shipments grew to Europe, up 67% to 105,861 tonnes, with those to the US doubling to nearly 55,000 tonnes, and to China adding 18.2% to 43,730 tonnes, SGS said.

'Much stronger start'

"Exports have got off to a much stronger start this month," said Edward Hugo at broker VSA Capital

"We think this bearish stocks data will be offset by the much stronger export figures for the first 10 days of May."

A "weaker tone" in the Malaysian ringgit helped palm oil prices too, in supporting export prospects, New York based Jefferies Bache said.

At Citigroup, Sterling Smith said that orders by palm oil importers in Islamic countries ahead of Ramadan festivals "should begin to accumulate, and this should help counter the build in stocks".

By James Moore

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