Indonesia’s July palm oil stocks at 5-year low amid higher biodiesel demand, low output

Indonesia’s palm oil stocks fell 10.82% in July from the month before to a five-year low of 2.51 million metric tons, as domestic demand for biodiesel increased and production fell, data from a leading industry body showed on Wednesday.

Falling stocks in Indonesia, the world’s biggest producer and consumer of the tropical oil, could support benchmark Malaysian futures FCPOc3 trading near their highest level in 2-1/2 months.

“Food sector consumed 5.76 million tons, 5.18% lower compared to last year. While biodiesel use (was) at 6.44 million tons, or 10.84% higher compared to the previous year,” Indonesian palm oil association GAPKI said in a statement.

Indonesia’s domestic consumption in the first seven months of this year increased 2.17% to 13.51 million tons, driven by higher biodiesel blending as the country fully implemented 35% mandatory palm-based biodiesel blending known as B35.

Palm oil shipments by Indonesia, the world’s biggest palm oil exporter, dropped 33.3% on a monthly basis to 2.24 million tons in July.

However, declining output in May to July pressured stocks.

“Production in the last few months dropped. In August output rose, so the stock will improve,” said GAPKI secretary general Hadi Sugeng.

A New Delhi-based dealer with a global trade house said: “The stocks of 2.5 million tons are smaller than the market expectations. This suggests Indonesia can manage supplies very well even if production goes up this month as believed by many.”

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Tags: shipments, futures, consumption, demand, Indonesia, Production, palm oil, stocks