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KUALA LUMPUR: Malaysia's January palm oil stocks slipped to a five-month low as a decline in production outpaced a drop in exports, industry regulator Malaysian Palm Oil Board said on Friday.
Stocks in the world's No 2 producer of the edible oil fell 2.5 per cent to 2.0 million tons from December last year, almost matching market expectations of a 2.2 per cent drop.
The still-high inventories can potentially shore up global edible oil supply in the wake of erratic weather affecting soy crops in South America.
Benchmark palm oil futures on the Bursa Malaysia Derivatives Exchange may come under some pressure after losing 0.8 per cent at midday ahead of the data release.
“Stocks are still around 2 million tons which is enough for one-and-a-half months of exports,” said a trader with a foreign commodities brokerage.
January production dropped 13.9 per cent to 1.29 million tons from a month ago on seasonally weaker yields after strong output last year with reports of some heavy rain affecting harvesting.
Planters and traders expect Malaysian output in February to decline further on weaker yields although it may not be a double-digit percentage fall as the weather has improved and there are fewer public holidays this month.
Malaysia's January exports also dropped 13.2 per cent to 1.38 million tons as the government had not issued a tax free export quota for crude palm oil at the time and overseas buyers preferred Indonesian cargoes offered at a discount.
Traders are counting on China, a key customer of Malaysian palm oil, to start restocking in a big way after the Lunar New Year holidays in late January, and for more crude palm oil exports after the duty free quotas.
Malaysian imports of Indonesian crude palm oil rose 32.1 per cent to 167,487 tons, MPOB said.
