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Malaysian November palm oil inventories may grow to 2.5 mil mt: CIMB Bank

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Malaysian November palm oil inventories may grow to 2.5 mil mt: CIMB Bank

Singapore — Malaysian November palm oil inventories may have grown by 14% month on month to 2.5 million mt, driven by higher crude palm oil production in Sabah and peninsular Malaysia and lower import demand from destination markets like India, China and the EU, predicted the latest palm oil forecast from Malaysia's CIMB Bank.

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The monthly survey of Malaysian plantations conducted by the CIMB team, released Friday, suggests that Malaysian CPO output may have increased by 1% month on month in November to 2.03 million mt.

This bucks the historical November five-year average month-on-month decline in production of around 9%, and also CIMB's own earlier forecast of an 8% drop.

The strong production in CPO comes late in the year after the El Nino of 2016. CIMB Bank expects yearly 2017 production to peak either in November or December.

Meanwhile, palm oil exports from Malaysia were estimated to have fallen around 6.4% month on month, to around 1.45 million mt based on export data released by Societe Generale de Surveillance (SGS) and Intertek Testing Services (ITS).

Lower palm oil exports from Malaysia in November were largely due to weaker Indian demand for palm oil, which dropped 36% month on month, attributable in part to destocking within the country after a hike in import duties on crude and refined palm oil, CIMB said.

Crude palm oil duties were raised to 30% from 15% earlier and refined palm oil import duties were raised to 40% from 25% earlier.

CPO futures prices fell around 3% month on month in November to an average of MR2,657/mt or $653.95/mt primarily because of concerns that Indian palm oil consumption would fall, CIMB said.

The drop in prices had however, widened the average spread between CPO and soybean oil to $200/mt in November from $146/mt in October, increasing palm's attractiveness to buyers, it added.

Finally, reports from the Bureau of Meteorology Australia reveal that the tropical Pacific Ocean is nearing La Nina thresholds, and 2017-18 may be considered a La Nina event. However, it would be a weak and short-lived event, CIMB said.

The impact of La Nina on Southeast Asia is heavier monsoons in the Indian subcontinent and torrential rains and flooding in Southeast Asia. Higher than usual rainfall in Southeast Asia could potentially reduce palm oil yields due to operational disruptions and lower fresh fruit bunches due to poor pollination, CIMB said.

--Samar Niazi,

--Edited by Jonathan Loades-Carter,