KUALA LUMPUR: Palm oil inventories in Malaysia grew at a slower pace than anticipated in May as production in the world’s second-largest supplier lagged and domestic consumption surged.
Stockpiles edged up only 1.5% from a month earlier to 1.57 million tons, according to the Malaysian Palm Oil Board on Thursday, less than the 1.63 million tons forecast in a Bloomberg survey.
That’s still the third monthly increase and the highest level since October.
Crude palm oil production advanced 2.8% to 1.57 million tons, also the highest since October, versus an estimate for 1.56 million tons. That represents a marked slowing from growth of 7% in April and 28% in March, and prevented a bigger build up in inventories.
Exports meanwhile posted a surprise 6% drop to 1.27 million tons, compared with an estimate of 1.35 million tons.
“Many analysts pegged the end-stocks higher, so the actual May figures caught many by surprise, ” according to Paramalingam Supramaniam, director at Selangor-based broker Pelindung Bestari.
The MPOB report, released after the midday break, showed imports fell 19% in May from a month earlier. Local consumption is estimated to have climbed 96% due to Ramadan and the Eid al-Fitr festival, according to Sathia Varqa, owner of Palm Oil Analytics in Singapore.
Futures in Kuala Lumpur rose as much as 1.5% to RM3, 930 a ton in the morning session. The bullish MPOB report may give a boost to prices, with market participants now closely watching production and exports in June.
“The lack of manpower in Malaysian estates is manifesting itself and the production levels attest to that, ” Paramalingam said.
“Exports will be the key -- the first 10 days shipments will be lower mainly due to space and freight constraints, but we expect demand to remain steady as palm oil is still the cheapest in the edible oil fraternity.” - Bloomberg