Malaysia's January palm oil stocks likely dropped to a six-month low as overseas demand outpaced sluggish output, a Reuters poll showed on Tuesday. Inventories in the world's No 2 producer dropped 10.2 percent to 1.45 million tonnes, the median survey of five plantation houses showed.
Production tumbled 14.8 percent to 1.05 million tonnes as harvesting activities key growing regions states were stalled floods and heavy rains, which may have resulted in weaker yields. Exports fell 5.1 percent to 1.22 million tonnes, but outpaced production. China slowed down buying ahead of this month's Lunar New Year holidays due ample stocks and higher prices of vegetable oils. January imports of crude palm oil from Indonesia, the No 1 producer, rose 13.1 percent to 120,000 tonnes, as firms tried to ship out as much as they could before the Jakarta raised export taxes to 25 percent from 20 percent this month.
FACTORS TO WATCH: Traders said output may continue to fall as floods inundated major planting states of Johor in southern Malaysia and Sabah on Borneo island, that together make up more than half of national output. Although the rains have slowed and floods are receding, planters are concerned that prolonged moisture will affect yields. Overseas demand is expected to recover after Chinese New Year holiday but may be muted due to the high prices. Palm oil hit a three-year high on Tuesday.
Imports from world's No 1 palm oil producer might decline after Indonesian government imposed higher exports tax in February as prices continue to rise. The rally may continue if the rainy weather gets worse in Malaysia and Indonesia. Also the impact of weather in Argentina, which exports competing soyaoil, will be closely watched. Recent weather forecast showed hot and dry weather in southern hemisphere that has stressed soybean output could ease in recent weeks. Analysts said THE US Department of Agriculture is expected to report tighter global ending soybean stocks in February.
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