Malaysia’s palm oil stocks fell 21% by end-March compared with the previous month, well below market expectations as exports surged while production grew at a slower rate, data from the Malaysian Palm Oil Board showed April 10.
End stocks at the world’s second largest palm oil producer and exporter fell to 1.673 million mt, much lower than the 1.795 million mt expected by the market, according to a S&P Global Commodity Insights survey.
Stocks were higher on year-on-year basis from the 1.474 million mt seen at the end of March 2022, according to the MPOB data.
Exports surged in March to 1.486 million mt, up 31% on the month and better than market expectations of 1.325 million mt, the MPOB said.
Crude palm oil production in March rose to 1.288 million mt, up 2.8% from February but lower than the 1.411 million mt output in March 2022.
Malaysia’s benchmark June palm oil contract on the Bursa Malaysia Derivatives exchange opened lower at MR 3,765/mt ($854.13) and fell to MR3,754/mt during afternoon trade with traders pointing to a lack of fresh destination buying.
Demand outlook “fragile”
“The MPOB report is bullish for the market owing to the huge drawdown in inventories along with the high demand. Yet palm oil demand for April is expected to be flattish given the relative value of edible oils and the likelihood of production picking up moving forward,” Marcello Cultrera director at commodities consultancy Apricus 8 Pte Ltd in Singapore said.
Concerns over demand outlook were shared by other trade sources who spoke of high stock buildups at largest buyers India and China as well as palm oil’s falling cost advantage compared with soybean and sunflower oils.
Destination demand is very “fragile” right now, Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group said, citing high stocks as well as lower sunflower oil prices which would shift demand away from palm oil.
Argentina’s third soy dollar program and Brazil’s record soybean output in Latin America, along with strong rapeseed supplies in EU and higher than expected sunflower seed stocks in Russia and Ukraine may cap the tight supply-related bullishness in palm oil, Bagani said in an April 10 note.
Data from cargo surveyor Intertek showed a sharp decline in Malaysian palm oil exports during the April 1-10 period with exports falling 35% compared with the February 1-10 period.
Source: Hellenic Shipping