KUALA LUMPUR: Malaysia's March palm oil inventories rose 1.67% from February as an unexpected jump in production exceeded an increase in exports, official data showed on Friday, but demand is set to slow in the face of global coronavirus-led lockdowns.
End-March stockpiles in the world's second largest producer grew to 1.73 million tonnes after five months of decline, according to data by industry regulator the Malaysian Palm Oil Board (MPOB).
March production took the market by surprise with a 8.4% increase from February to 1.4 million tonnes, MPOB data showed.
Planters in Malaysia had estimated that the industry may lose 500,000 tonnes of fresh fruit bunch harvest after the country shuttered some plantations and mills until April 14 as part of a nationwide restriction to contain the coronavirus outbreak.
The market is gripped by uncertainties on whether the shutdown order would be extended, said Sandeep Singh, director of Kuala Lumpur-based trading firm The Farm Trade.
"Given the nationwide restrictions in Malaysia, the reported data may not truly reflect the actual state of the industry for the month of March," Sathia Varqa owner of Singapore-based Palm Oil Analytics said.
March exports were up 9.2% from February to 1.18 million tonnes despite the pandemic closing businesses and borders around the world, according to MPOB data.
Exports were better than expected, but the market is not expecting high shipment figures this month as global demand starts to slow amid a possible recession, traders said.
Malaysia's March exports to top buyer India plunged by half from the previous month to only 10,806 tonnes, while sales to no.2 buyer China fell 5.6% to 148,017 tonnes.
The bearish data may continue to pressure Malaysia benchmark crude palm oil. The contract has already fallen about 25% since January to trade at 2,289 ringgit ($9,946.12) per tonne on Friday.
A Reuters survey had forecast palm oil's end-March stockpiles to fall 1.8% to 1.65 million tonnes, while production was forecast to rise 2% to 1.31 million tonnes.
Exports were expected to gain 6% to 1.08 million tonnes. - Reuters
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