PETALING JAYA: Malaysia's palm oil inventory finally eased to 1.93 million tonnes in April after staying above the 2 million-tonne threshold for the past 10 months, which had led to concerns that crude palm oil (CPO) prices would likely be dragged down further.
Palm oil stocks fell by 11.4% in April from 2.17 million tonnes in March, said the Malaysian Palm Oil Board (MPOB) in its latest monthly release.
As at end-December 2012, local palm oil stocks had soared to an all-time high of 2.63 million tonnes.
A trader told StarBizWeek that the imposition of the Government's new CPO export tax structure early this year, which saw a tax cut in the range of between 4.5% and 8.5% from 23% previously (unchanged since 1970s), was a good measure to curb the rising record palm oil stocks.
In January and February, zero duty was imposed on local palm oil exports, but this was raised to 4.5% in March and April. The CPO export duty for June is expected to be announced on Wednesday.
On another note, MPOB said exports declined 5.6% to 1.45 million tonnes in April from 1.54 million tonnes a month earlier.
“The April export figure is one of the lowest monthly figures this year and is likely to remain weak in the following months, as the stronger ringgit makes local CPO pricier, especially to price-sensitive major export markets like China and India,” said the trader.
Bloomberg reported yesterday that China Cereals & Oils Business Net said palm oil inventories in China, the second-biggest importer, rose to a record, as inbound shipments outpaced consumption.
Stockpiles at coastal ports exceeded 1.5 million tonnes, compared with 1.46 million tonnes a month ago.
High inventories may begin to slow China's purchases and weigh down prices, which have fallen 4.8% on Bursa Malaysia Derivatives this year, after slumping 23% in 2012.
Industry observers opined that the latest high palm oil inventories in China and India may put pressure on both CPO prices and exports in the coming months.
CPO production for the month under review, meanwhile, increased marginally by 3.12% to 1.37 million tonnes from 1.33 million tonnes in March.
“The higher production in April is within expectations, following the end of the low CPO production season in the first quarter and the start of the traditional high production season in the second quarter,” said analysts.
JF Apex Securities in its latest plantation sector report said positive news on the lower palm oil inventory in April had failed to excite the palm oil market, as concerns over lower soybean prices continued to cloud the pricing for the oil.
“Yet, data of the palm oil inventory falling below the 2 million-tonne threshold and stronger demand in the month of Ramadan (in July) shall provide momentum to CPO prices,” it added.
Plantation companies, incidentally, are due to report their quarterly results by the end of this month.
The research unit expects weaker earnings on a sequential quarterly basis, as “planters are suffering from weaker CPO production in the first quarter of 2013”.
It said planters could also report slightly negative results on a year-on-year (y-o-y) basis, as the significant lower CPO price, down by 27% y-o-y, may more than offset the recovery in CPO production.
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