Malaysian May palm oil stocks to hit 8-month high as exports stall: survey

Malaysia's palm oil ending stocks could exceed 1.6 million mt in May, which would represent the highest level since September, as a pandemic-led slowdown in India and the arrival of new Brazilian soybeans into China dampened exports in the second half of the month, according to a survey conducted by S&P Global Platts.

Month-end stocks were seen rising by 6.3% from April to 1.642 million mt, according to the median estimate of nine analysts and traders polled by Platts.

The official supply and demand data for May will be released by the Malaysian Palm Oil Board on June 10.

While the survey projection is lower than Malaysia's average monthly inventory of 1.723 million mt in 2020, May's forecast could signal a recovery from the severe dip in Malaysia's palm oil stocks due to low production and strong demand in the first quarter of 2021.

"Stocks will start improving slow and gradually from May onwards to reach closer to 2 million mt by Q4 [October-December]," Aditya Jeripotla, the head of the oilseeds division at commodity research company TransGraph said.

Malaysia's May palm oil exports are expected to fall marginally to 1.345 million mt from 1.346 million mt April, the Platts palm oil survey showed.

A second wave of COVID-19 infections in India, combined with record high crude palm oil prices, have subdued demand from the country, the largest buyer of crude palm oil. The bearish buying sentiment is expected to weigh on India's imports for the next few months.

Production expectations pull market down

Malaysia's palm oil production is expected to grow by 3.9% to 1.582 million mt in May, the Platts survey showed.

Earlier in June, the Malaysian Palm Oil Association, a domestic industry body, said it expects crude palm oil production to rise by more than 7% to 1.62 million mt for May.

Malaysian palm oil futures fell for the third consecutive session on Wednesday with the benchmark BMD contract for August down 191 points.

"Market has reacted with a bearish momentum to not only the MPOA production estimate but also the easing palm oil export pace in June," Anil Kumar Bagani, head research analyst for vegetable oil broker Sunvin Group said.

A nation-wide restriction on movement and businesses in Malaysia along with ongoing labor problems at palm oil plantations may tie down production growth in June, though its currently unclear by how much, industry watchers said.

May to October marks the peak production season for Malaysia's palm oil plantations and millers.