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Malaysia's palm oil inventories seen swelling to a 34-month high in Sep: survey

Highlights

Exports to rise 9%, production up marginally

Domestic consumption to rise in Sep

Flood risk may cap production growth at end-year

  • Author
  • Aditya Kondalamahanty    Nurul Darni    Samyak Pandey
  • Editor
  • Ankit Rathore
  • Commodity
  • Agriculture

Malaysia's palm oil inventories are expected to rise to 2.213 million mt in September, reaching their highest level since December 2019, an S&P Global Commodity Insights survey showed Oct. 6.

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End-September stockpiles are expected to swell by 5.7% on the month as production growth outpaces exports, according to a median estimate of 15 analysts, traders, and producers surveyed by S&P Global.

The Malaysian Palm Oil Board, or MPOB, will release August supply and demand data on Oct. 10.

Exports may rise to 1.42 million mt in September, up 9% from 1.299 million mt in August, the survey showed. As palm oil prices slid to their lowest levels in the last year, demand has risen. However, export growth for September has been capped by discounts offered by larger rival Indonesia and global recession fears, according to industry sources.

Malaysia's palm oil imports were seen at 100,000 mt for September, down from 145,000 mt in August, according to a median of eight estimates. Local consumption was pegged at 283,500 mt for the month.

Supply and outlook

Malaysia's palm oil production for the month is seen rising to 1.738 million mt in September from 1.725 million mt in August, the survey showed, as inflows of foreign workers into plantations picked up in some parts of the country.

Malaysia relies heavily on foreign laborers to work and harvest oil palm fruits, and a shortage of workers has pressured production at the world's second-largest palm oil exporter since 2020.

"We expect production to peak in September 2022 and the decline in the last quarter of the year," Aditya Jeripotula, head of research at Hyderabad-based Transgraph Consulting said.

In the October-December quarter, Malaysia's production is expected to be around 4.8 million mt, down from 5.06 million mt in the July-September quarter, Jeripotula added.

Heavy rains may dampen production in Malaysia and Indonesia toward the end of the year, as floods hinder harvesting and planting work, Abdul Hameed, head of Manzoor Trading Company in Lahore said.

While Malaysia's metrological department ruled out major floods until early November and said that the Northeastern monsoon is yet to arrive Oct. 5, it predicted that thunderstorms and intermittent heavy rains have raised the chances of flash floods in some parts of the country.

Prices

Although the third-month crude palm oil futures on Malaysia's commodity exchange fell to MR3,417/mt ($737.06) on Sept. 30, reflecting an 18-month low, it has risen 8% since then to close at MR3,701/mt on Oct. 6, data from the exchange showed.

Driven by gains in the futures market, the FOB Indonesia price for CPO gained $24/mt from Oct. 4, reaching $824/mt for October loading on Oct. 5, with Platts, part of S&P Global, assessing November loading at $829/mt.