KUALA LUMPUR/MUMBAI: Malaysia’s palm oil stocks rose to their highest in seven months at the end of August as exports fell sharply, data showed on Monday, likely adding pressure on prices.
Inventories jumped 22.5% in the world’s second-largest producer of the commodity to 2.12 million tons, according to data from the Malaysian Palm Oil Board (MPOB).
That was higher than the 1.89 million tons, or 9.23% growth, estimated by a Reuters survey of 11 traders and analysts.
Exports of palm oil - the world’s most widely used vegetable oil - fell 9.78% to 1.22 million tons, also worse than market estimates for a 1.77% drop to 1.33 million tons.
“No one from the market had expected this level of stocks. The rising stocks and falling exports will exert additional pressure on palm oil (prices),” said a New Delhi-based dealer at a global trading house.
The MPOB data showed that crude palm oil production gained 8.9% from July to 1.75 million tons in August, higher than expectations of 1.72 million tons.
Malaysia’s output is expected to take a hit in the near term from the El Niño weather phenomenon, which brings prolonged hot and dry weather.
Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group, said Malaysia’s exports would continue to be lower in September due to a build up of stocks at key destination markets like India and lower prices of competing oils such as sunflower oil and soybean oil.
“…The market is still heavily relying on the El-Nino impact and expecting a cut in production from October onwards, but as of now no such indication seen at both Indonesia and Malaysia,” Bagani said.
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