Malaysia’s March palm stocks seen up, first gain in four months

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KUALA LUMPUR: Malaysia’s palm oil stocks likely rose for the first time in four months in March as higher output in the world’s second-largest producer of the tropical oil offset export demand, a Reuters poll showed.

Rising supplies of palm, coming at a time when the market is bracing for record harvests of rival oilseeds, will dent prices of the tropical oil that fell more than six per cent in March – their worst monthly showing since August last year.

A median forecast by six planters, traders and analysts show Malaysia’s crude palm oil (CPO) production probably rose 17.7 per cent from a month ago to 1.32 million tonnes in March, the first such rise since August last year.

In February this year, output hit its weakest since early 2011, data from the Malaysian Palm Oil Board showed.

Industry players expect production to pick up pace as yields in the top-producing Borneo region recover.

“In February, it was Peninsular Malaysia’s output that picked up a lot, not Sabah,” said Phang Loy Fatt, an official with the marketing division of Malaysian planter Kuala Lumpur Kepong Bhd.

“When you come to March, both sides will increase.”

The Borneo states of Sabah and Sarawak supplied almost half of Malaysia’s total palm in 2014.

Malaysian palm oil exports are forecast at 1.15 million tonnes in March, up 18.3 percent from February when shipments tumbled to an eight-year low.

But analysts said this was not an indication of real demand as sales were driven by a rush to book CPO shipments ahead of a revival of Malaysian export duties from April that ends a duty-free policy held since September.

“The monthly exports of palm oil staged a good pick-up month-on-month due potentially to the rush by producers to export CPO ahead of the 4.5 per cent export tax to be imposed on April 1,” CIMB analyst Ivy Ng said.

Malaysian end-March palm oil stocks were pegged at 1.75 million tonnes, up 0.2 percent from February, the first monthly rise since November 2014.

Respondents’ forecasts ranged for March stocks to drop by two per cent to climb by more than 10 per cent.

The median figures from the survey imply domestic consumption of 239,032 tonnes in March.

The market is now keeping an eye on a proposal by top grower Indonesia to impose levies on exports of its crude and processed palm oil that could be approved this week.

Benchmark palm prices are currently at RM2,214 a tonne. — Reuters