Malaysian palm stocks at 7-mth low, Feb exports weakest since 2007

(Reuters) – Malaysian palm oil stocks sank to a seven-month low at February-end as floods in Borneo and less working days due to the Lunar New Year break cut output levels, but the drop was smaller than expected as overseas sales hit their weakest since 2007.

While lower stockpiles in Malaysia, the world’s No.2 palm oil producer after Indonesia, could support benchmark prices of the tropical oil, a bleak export demand outlook amid ample supplies of rival soyoil means gains will be capped.

“Everything is not exactly dandy on the export front,” said Lingam Supramaniam, director at Malaysia-based commodities firm Pelindung Bestari. “We anticipate lots of competition from Indonesia and South America as we move forward.”

Data released by the Malaysian Palm Oil Board (MPOB) on Tuesday showed inventories fell 1.5 percent from a month ago to 1.74 million tonnes, their smallest since July.

A Reuters poll had pegged stockpiles to fall 3 percent to an eight-month low of 1.67 million tonnes.

Malaysia’s crude palm oil production fell 3.4 percent to 1.12 million tonnes, their weakest since February 2011, just slightly more than estimates of 1.13 million tonnes.

Poor export demand, however, prevented a steeper drop in stocks. The MPOB said shipments of Malaysian palm oil tumbled 18.4 percent to 971,640 tonnes. The last time Malaysian exports were this weak was in July 2007 when only 947,697 tonnes were shipped, according to Reuters data. MYPOME-PO

Cargo surveyor Intertek Testing Services data released earlier showed that Malaysian palm oil exports fell 12.3 percent between March 1-10 from the corresponding period last month, as Europe and China slashed imports of the tropical oil.

Ahead of the MPOB report, the benchmark May contract on the Bursa Malaysia Derivatives Exchange fell 0.6 percent to 2,257 ringgit ($611) a tonne, down for a fifth day.

Leading vegetable oil analysts at a palm conference last week said they expect palm prices to rise in the near term on tighter supplies at top growers Indonesia and Malaysia, but painted a gloomy outlook for the second half citing a robust recovery in output and lacklustre demand.

“Albeit trying to clutch the straw of optimism from the end-stocks, production will gain traction in the coming months and prices will certainly re-test fresh lows, before it turns better,” said Lingam in Kuala Lumpur.