(Bloomberg) – Palm oil reserves in Indonesia probably climbed for the first time in three months after production in the world’s biggest grower increased and exports retreated from a six-year high.
Stockpiles rose 7.1 percent to 2.25 million metric tons in November from a month earlier, according to the median estimate from six analysts, planters and refiners compiled by Bloomberg. Exports fell 7.3 percent to 2.29 million tons, while production gained 4 percent to 2.35 million tons, the survey shows.
Palm futures are heading for the third annual loss in four years as global cooking oil supplies expand and a plunge in crude oil to the lowest since 2009 reduces demand for biodiesel. Biofuel policies in Indonesia will determine the direction of prices in the next 12 months as output swells, according to Dorab Mistry, director at Godrej International Ltd.
“Palm oil is at the start of an uptrend pattern,” Hariyanto Wijaya, a Jakarta-based analyst at PT Mandiri Sekuritas, said by phone on Dec. 8. “We may see stockpiles trending down from December as supply drops because of the low-crop cycle and impact from dryness in the first quarter.”
Palm retreated 19 percent on Bursa Malaysia Derivatives this year, reaching a five-year low of 1,914 ringgit ($555) a ton on Sept. 2 before rebounding. Most-active prices traded at 2,161 ringgit a ton at 4:03 p.m. in Kuala Lumpur today. Futures may jump to 2,500 ringgit by March 4 and extend gains as inventories bottom out around June, Mistry said Nov. 28.
Tax-Free Exports
Most palm oil exports from Indonesia became tax-free in October after prices fell below the average used to calculate tariffs. The government kept the zero tax rate in November and this month. Malaysia, the second-largest supplier, scrapped the tariff on exports in September and extended it through the end of the year to cut inventories and support prices.
The extension of tax-free sales slowed orders last month and importers had sufficient stockpiles, said Derom Bangun, chairman of the Indonesian Palm Oil Board. “People knew that the duties will stay at zero in December, so they’re not in a hurry to buy,” he said on Dec. 1.
Shipments from Indonesia jumped 46 percent to 2.47 million tons in October, the Indonesian Palm Oil Association said on Nov. 21. That’s the highest level since the group started publishing the data in January 2008. Exports are seen at about 2 million tons in November and little below 2 million tons in December, Bangun said Nov. 24.
“Production increases mostly come from newly matured trees,” Sahat Sinaga, executive director at the Indonesian Vegetable Oil Industry Association, said by e-mail. “Trees planted four to six years ago get more intensive care and watering, making them less prone to the weather impact. While older crops are still suffering stress from the dryness, output from the younger trees has recovered.”
The association usually reports monthly export figures in the second half of the following month. The percentage changes for output and reserves in the survey are based on previous estimates.
