May surge in Malay palm oil exports calms investor nerves

(Agrimoney) – A strong start to May for Malaysian palm oil exports saw futures in the vegetable oil rise, despite data showing the fastest rise in inventories for more than two years.

Palm oil exports from Malaysia, the second-ranked palm oil producer, soared in the first 10 days of this month, compared with the same period of April, data from cargo surveyors showed.

Intertek Testing Services said Malaysian palm exports for the period jumped 41% from a month ago, to 458,677 tonnes.

Societe Generale de Surveillance put the increase at 45%, taking shipments to 464,520 tonnes.

‘Strong palm oil exports’

Shipments to China and India were viewed as particularly strong by both cargo surveyors, which also highlighted large jumps in shipments of crude palm oil, far faster than those of refined products, and appeared to reflect a cut by Malaysia to its export duty.

The country, also the second-ranked palm oil exporter, reduced to zero its tax on crude palm oil shipments, from a rate of 4.5% last month.

“We reckon that the strong palm oil exports were buoyed by the zero crude palm oil export duty in May,” said Jessica Low Jze Tieng at Malaysia-based broker JF Apex Securities.

“Pre-Ramadan demand also helped lifted palm oil exports,” she said.

Stocks surge

The data helped palm oil futures settle 1.5% higher at 2,195 ringgit a tonne in Kuala Lumpur, despite separate data showing the strongest rebuild in Malaysian inventories of the vegetable oil last month since December 2012.

Inventories rose 17.6% on the previous month to 2.19m tonnes, also a little above the figure of 2.13m tonnes that investors had expected.

Malaysian crude palm oil production was up 13.3% in April, to 1.69m tonnes, a little above market expectations.

Palm oil production in Malaysia is rebounding from the cumulative effect of droughts in 2014 and heavy rains in early 2015.

However, exports edged down by 0.6% to 1.18m tonnes – the weakest April exports since 2007.

‘Delayed purchases’

The softness in April shipments reflected restraint by buyers wishing to exploit the cut of Malaysia’s export taxes this month, Ms Low said.

“We believe buyers from India, which are sensitive to crude palm oil prices, delayed purchases to May to take advantage of zero crude palm oil export duty and hence resulted in significantly lower palm oil exports in April [year-on-year],” she said.