Malaysia’s end-May stockpiles seen higher as output jumps to highest this year

Malaysia’s palm oil inventories at the end of May are expected to rise as production swells to its highest so far this year while exports remain flat.

Stockpiles are forecast to rise 6.8% from April to 1.6 million tonnes, snapping a three-month decline.

That is about 5% higher than a year ago.

Production in the world’s second-largest producer is seen rocketing 21% to 1.45 million tonnes, the highest level since December.

Supportive weather conditions, more harvesting days and an improvement in yields compared to the previous month helped the surge in production, said Nagaraj Meda, managing director at TransGraph Consulting.

Exports are seen ticking up 0.7% to 1.08 million tonnes due to tougher competition from larger rival Indonesia, which had in recent weeks lowered its export duties in a bid to raise exports.

Buyers in top importer India had cancelled expensive palm oil cargoes and replaced them with cheaper soyoil and sunflower oil, causing India’s palm oil imports in May to sink to a 27-month low.

A recent downtrend in Malaysia’s benchmark crude palm oil prices, which have fallen 19% so far this year, has helped improve its competitiveness against soft oils.

Analysts said shipments from Malaysia are expected to improve from June onwards due to the rising production and improving demand from major destinations.

The Malaysian Palm Oil Board (MPOB) is scheduled to release its data on June 12.