KUALA LUMPUR (Oct 7): Malaysian palm oil stocks at the end of September likely held steady at a more than one-year high above 2 million tonnes, a Reuters survey showed on Tuesday, as a removal of export taxes was unable to boost shipments as much as initially expected.
High inventory in the world's No.2 producer after Indonesia could crimp a recovery in benchmark Malaysian prices that have risen about 15 percent from a more than five-year low of 1,914 ringgit ($586.94) per tonne hit early last month.
The median survey of seven planters, traders and analysts pegged September palm oil stocks at 2.05 million tonnes, the same as August and at their highest since March 2013.
"Exports were good, no doubt, but it was not good enough," said a trader with a local commodities brokerage in Malaysia.
"We should have done at least 1.65 million tonnes. And production did not fall enough," the trader added.
Overseas sales of palm oil products by the key producer likely hit 1.6 million tonnes last month, the survey showed, up 11.3 percent from a month ago as buyers from India, China and Europe snapped up shipments after Malaysia scrapped taxes on crude palm oil exports for September and October.
Indonesia also removed its tax on crude palm oil exports for October in response to the Malaysian duty structure.
Cargo surveyor data show that Malaysian palm oil exports were 16-17 percent higher in September from August, with demand for crude palm oil surging.
Poll participants estimate that Malaysia's crude palm oil output in September likely dropped 8 percent to 1.87 million tonnes, after a 22 percent surge in August.
"Dryer-than-expected weather in East Malaysia and the effect of the super harvest in August were the reasons for lower output in September," said Hiro Chai of CIMB Futures in Kuala Lumpur.
Some industry players had, however, previously expected that an output drop of as much as 10 percent would help bring down stocks to 1.95-1.97 million tonnes in September.
The median figures from the survey implied domestic consumption in September of about 288,356 tonnes.
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Malaysian palm prices climbed 15 percent in September, turning around after two straight months of losses to clock their biggest monthly rise since April 2009.
Some analysts say prices could rise between 8-10 percent to $730-$750 per tonne in the first quarter of 2015 as production growth in the top two planters moderate and stockpiles begin to fall again.
But other vegetable oil analysts say palm could hit a 5-1/2-year low of 1,900 ringgit, as demand fizzles out towards the end of the year when the northern winter approaches and buyers switch to other edible oils.
Demand for the tropical oil usually slows in winter because cold weather solidifies the oil and makes it unusable.
Palm futures could come under further pressure as crude oil prices weaken amid ample supply and make the tropical oil a less attractive option for biodiesel feedstock.
Brent tumbled to a more than two-year low of $91.25 per barrel on Monday due to a global supply glut and a firmer dollar which makes commodities priced in the greenback more costly for buyers using other currencies.
The stronger dollar, however, would weaken the Malaysian currency and help restrict losses for the ringgit-denominated palm feedstock, analysts said.
Breakdown of September's estimates (in tonnes):
Range Median Production 1,787,944 - 1,926,000 1,870,000 Exports 1,550,000 - 1,676,000 1,600,000 Imports 5,000 - 40,000 18,348 Closing stocks 2,000,000 - 2,163,421 2,054,000 * Official stocks of 2,054,008 tonnes for August, plus the above estimated output and imports give a total September supply of 3,942,356 tonnes. Based on the median of the exports and closing stock estimates, Malaysia's domestic consumption in September would be 288,356 tonnes. ($1 = 3.26 Malaysian ringgit)