KUALA LUMPUR: May palm oil stockpiles in Malaysia, the world’s second-largest producer, are expected to have fallen to their lowest level in over five years, with strong demand ahead of the Ramadan fasting month causing exports to rise faster than output.
Lower inventory levels could support palm oil’s benchmark prices, which climbed to a three-week high last Friday to close a second straight week of gains up 4.2 percent.
Palm was trading 0.3 percent lower on Monday evening at the close of trade at 2,659 ringgit ($650) per tonne.
Palm oil end-stocks are expected to have fallen 8.8 percent from the previous month to 1.64 million tonnes at end-May, their lowest level since March 2011, according to a Reuters survey of nine planters, analysts and traders.
Inventories are likely to have declined as Malaysia’s crude palm oil export growth outpaced a rise in production, which was seen as still hampered by last year’s crop-damaging El Nino.
Exports are seen having surged 13.1 percent to 1.32 million tonnes, up from 1.16 million tonnes in April.
“Demand is supported by stocking activities by major consumers such as Pakistan and India, as consumers in such countries tend to consume more palm oil during Ramadan, and after that at Eid al-Fitr,” said MIDF Research plantations analyst Alan Lim.
“There will be a slight decline in exports post-Ramadan, but the decline won’t be too significant due to summer demand from the Northern Hemisphere.”
The holy month of Ramadan, which begins on June 6 this year, is celebrated by Muslims worldwide and marked by fasting followed by communal feasting. This creates higher palm oil demand for cooking ahead of Ramadan and the Eid al-Fitri holiday that marks the end of the fasting month.
Output in contrast with exports is forecast to have grown only 3.9 percent to 1.35 million tonnes in May, its slowest April-to-May growth rate since 2013, as the delayed impact of the dry weather from El Nino cut yields.
“Peninsula Malaysia output as a whole is down,” said Lingam Supramaniam, director of Malaysia-based commodities firm Pelindung Bestari.
“Production there for the next two months should be down too,” he said, though forecasting that Malaysia’s output growth will continue and reach its usual seasonal peak in August.
Official data will be released by the Malaysian Palm Oil Board on June 10. The median figures from the survey imply domestic consumption of 233,201 tonnes in May.