Palm Oil Drops for Sixth Day as Southeast Asian Stockpiles Climb

Kamis, 27 September 2012 | 08:59

Palm oil for December delivery declined for a sixth day on speculation that the weak global economy will curb demand, leading to a build-up of inventories in Indonesia and Malaysia, the largest producers. The contract dropped as much as 1.5 percent to 2,607 ringgit ($850) a metric ton on the Malaysia Derivatives Exchange, and ended the morning session at 2,626 ringgit in Kuala Lumpur. Futures yesterday plunged to 2,577 ringgit, the lowest price for the most-active contract since September 2010, and are poised for a 13 percent loss this quarter.   

Stockpiles in Malaysia will continue to expand in October, November and December and may reach as high as 3 million tons by January, Dorab Mistry, director at Godrej International Ltd., said Sept. 23. Inventories in Indonesia have hovered between 3.5 million tons and 4 million tons since 2010 as against popular estimates of 1.5 million tons to 2 million tons, he said.   

“A big part of the decline could be due to speculative selling of CPO, driven by concerns over the sustained weak demand for palm oil due to weaker global growth, higher oilseed crushing activities and lower biodiesel demand,” Ivy Ng, an analyst at CIMB Group Holdings Bhd., wrote in a report today. “This is leading to a sharp build-up in stocks.”   

Malaysian reserves may peak at 2.43 million tons in October, said Ng. Demand for palm oil will pick-up by the end of the year, leading to a recovery in prices to around 2,800 ringgit to 3,000 ringgit, she said.                   

Malaysian Shipments   

Inventories climbed to 2.12 million tons in August, the highest level since October, the Malaysian Palm Oil Board said Sept. 10. Reserves reached a record 2.27 million tons in November 2008, according to the board.   

Exports from Malaysia rose 8 percent to 1.17 million tons in the first 25 days of September from 1.08 million tons in the same period in August, surveyor Intertek said today.   

November-delivery soybeans were little changed at $16.09 a bushel on the Chicago Board of Trade. Soybean oil for December delivery fell 0.6 percent to 53.85 cents a pound.   

January-delivery palm oil dropped as much as 1.8 percent to 7,218 yuan ($1,145) a ton on the Dalian Commodity Exchange, the lowest level for the most-active contract since September 2010, and traded at 7,242 yuan. Soybean oil for delivery in the same month fell 0.2 percent to 9,476 yuan a ton.