Palm gives ag markets rare piece of bulllish data

(Agrimoney) – Agricultural commodity markets received a, rare, slice of bullish news when Malaysia’s palm oil inventories were revealed to have fallen to a one-year low in June, with some upbeat export data for this month too.

Palm oil stocks in Malaysia, the second-ranked producer of the vegetable oil after Indonesia, fell 10.0% month on month in June to 1.66m tonnes, the Malaysia Palm Oil Board, the sector regulator, said.

The decline reflected in part a drop of 5.3% in production from May, at a time of year when output is typically increasing, but seen by investors as a sign that dry weather earlier in the year had indeed affected yields.

Exports rose 5.3% to 1.48m tonnes, a little above market expectations, helped by demand ahead of the ongoing Ramadan festival.

Export strength

And Malaysia’s palm exports remained buoyant in the first 10 days of July, separate data from cargo surveyors showed, with Intertek putting the rise at 14.1%, and Societe Generale de Surveillance at 18.7%.

Both inspection groups saw cargos to China as particularly strong, with those in India rising too.

Meanwhile, there are expectations too that July will unveil another soft production performance, given the onset of Ramadan, for which many of Malaysia’s increasingly Indonesian palm workforce return home.

“For July, we would expect weak production once more as Ramadan, from June 28 to July 27, reduces the number of harvest hours,” said Edward Hugo at broker VSA Capital.

‘Temper potential gains’

Mr Hugo added that Thursday’s data “should be seen as very positive for palm oil pricing, and with the prospect of another fall in production and even stronger exports in July, this should provide further support.

However, “as always, the prospect for a large, high quality US soybean crop will likely temper any potential gains”.

Indeed, grain and oilseed markets have extended declines this month on expectations for record US soybean and corn crops, with improved results from the US wheat harvest adding to the downbeat mood.

Palm oil for September recovered from a nine-month low of 2,349 ringgit a tonne reached ahead of the data to settle at 2,386 ringgit a tonne in Kuala Lumpur, a gain of 0.5%.