Palm oil stocks in August at year’s highest level

sharidan@thestar.com.my

PETALING JAYA: Local palm oil inventory rose to its highest level year-to-date in August at 2.11 million tonnes compared with 1.99 million tonnes a month earlier, reflecting a 5.81% increase and in line with expert and consensus views.

Although the high inventory could trigger much concern among industry players, it was somewhat counter-balanced by the rise in exports of palm oil that recorded a 10.05% increase to 1.43 million tonnes in August against July, according to Malaysian Palm Oil Board (MPOB) monthly statistic data released yesterday.

MIDF Research said the higher inventory in August might mainly be attributable to the decline in consumption.“Based on empirical analysis, consumption in August was almost always lower compared to that in July. And the higher export in August was mainly attributable to higher demand from China and India,” it said in a report yesterday.

Bloomberg, quoting independent market surveyor Intertek, reported that Malaysia’s palm oil exports rose 26.8% in the first 10 days of September. A total of 453,302 tonnes of the commodity were tracked on Sept 1 to 10, versus 357,372 tonnes in the same period in August.
Production of crude palm oil, however, slightly fell by 1.73% to 1.66 million tonnes in August compared with a month earlier said MPOB.

On CPO price, MIDF Research expects the price of CPO to rebound to above RM3,000 per tonne levels as the peak production cycle ends in the fourth quarter.

“Besides, as a consequence of the ‘financialisation’ of commodity trade, the CPO futures market is also very sensitive towards any stimulus news in the global economy.

“We expect that any move taken by the big economic powers to stimulate their economies, such as bond-buying programme, will help restore investors’ confidence that may result in higher commodity prices,” said the research house, which reiterated a “neutral” call on the sector.

MIDF Reseach also highlighted that CPO price fell sharply to a three-week low of RM2,865 per tonne on Friday due to the expectation of this rising inventory figure in August.

“We believe CPO price will continue to be volatile in the near term as a result of mounting concerns over the economic slowdown in US and China as well as the lingering debt problem in the eurozone,” it said. As at 5pm yesterday, three-month CPO futures price gained RM3 to RM2,930 per tonne.