KUALA LUMPUR/MUMBAI: Malaysia’s palm oil stocks surged to a four-month high in June, driven by a steeper decline in exports compared to production, the industry regulator said on Wednesday.

The rise in stocks in Malaysia, the world’s second-largest palm oil producer after Indonesia, would put pressure on benchmark futures, which fell more than 4% in two days.

Malaysia’s palm oil stocks at the end of June rose 4.35% from May to 1.83 million metric tons, the highest since February, the Malaysian Palm Oil Board (MPOB) said.

Crude palm oil production declined 5.23% from May to 1.62 million tons, while palm oil exports plunged 12.82% to 1.21 million tons,

A Reuters survey forecast inventories at 1.83 million tons, with output at 1.62 million tons and exports at 1.24 million tons.

Malaysian palm oil futures slip on rising stock concerns

“Stocks rose as expected, but the buildup is concerning. Palm oil inventories are increasing even before the peak production season begins in August,” said a New Delhi-based dealer with a global trade house.

“The discount of palm oil to soyoil and sunflower oil is small and needs to widen to stimulate demand. Otherwise, traditional buyers may shift to competing oils.”