Malaysia's March palm oil stocks dropped to six month lows as overseas demand outweighed a strong production recovery in absolute terms. The Malaysian Palm Oil Board said on Monday that stocks in the world's No 2 producer of the vegetable oil dropped 7.5 percent to slightly more than 1.65 million tonnes, a level unseen since September and staying within market expectations.
But pace of the decline in stocks has slowed as palm oil yield improved in key producing states of Sabah on Borneo island and Johor on the mainland while the drier weather from El Nino weather condition appeared to ease. "We may see stocks rise again in April. It is a possibility. Exports are going to stay stagnant and go lower because this is the low-demand season and the El Nino weather impact on palm oil is not as bad as we thought," said a trader.
But the dry spell, which hit estates in February and March, stunts the development of oil-rich palm flowers that take six months to mature and its impact will likely be felt during the peak production period in the third quarter then. Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 1.9 percent before the data release as traders took profits from a rally that pushed the market to three-week highs on Friday.
Exports rose 7.65 percent to 1,393,999 tonnes in March due to strong demand from China and the United States, MPOB data showed. Cargo surveyors have estimated that exports of Malaysia's March palm oil products rose at least 7 percent. Traders said April exports could fall and take a much bigger hit due to the soaring Malaysian ringgit against the US dollar, which makes crude palm oil more expensive for refiners to process and export. The following is a breakdown of Malaysian Palm Oil Board figures and Reuters estimates for March.
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