MUMBAI (Reuters) - Southeast Asia’s palm oil stocks are set to scale record highs in October or November, according to planters, traders and analysts surveyed by Reuters, as storage tanks at ports and mills pile up with supplies.
Rising inventories in the world’s top two producers of palm oil, used to make items ranging from cooking oil and soap to cosmetics and chocolate, could further pressure benchmark prices, which slumped to a 3-year low last week. Palm closed up 0.4 percent on Wednesday at 2,189 ringgit ($528.87).
Indonesian stocks are seen peaking at 5 million tonnes, based on the average estimates of poll respondents, with forecasts ranging between 4.9 million and 5.3 million tonnes.
Combined with near-record Malaysian inventories, this would push Southeast Asian stocks to a new record, according to United States Department of Agriculture data.
The Indonesian estimate is up from a month ago, when a Reuters survey pegged August inventories at 4.6 million tonnes, and compares to 4.3 million tonnes in July and just 2.6 million tonnes last year, as production rose to new highs while exports dipped.
“Record production throughout Indonesia is outpacing the export rate. Even with the robust demand for biodiesel, shipments of crude palm oil to biodiesel plants have been relatively slow due to the lack of infrastructure,” said an Indonesian planter.
“Smaller mills have stopped production because their tanks are full ... They have cash flow issues due to difficulties in selling their oil,” he said, adding that many port tanks are also full.
Malaysian stocks are expected to peak at 2.8 million tonnes, said poll respondents, who cautioned that inventories could run higher if demand fails to pick up. The survey had 10 respondents. Only five gave forecasts for Indonesia.
The Malaysian figure would be the highest since November 2015 when inventories touched 2.9 million tonnes, the highest in nearly two decades.
Palm stocks tend to peak towards the end of the calendar year and then decline due to a seasonal drop in production.
“If exports hit 16 million tonnes this year, stockpiles won’t go over 3 million tonnes, but we might need government help for that,” said a Malaysian plantations company manager, who declined to be identified as he was not allowed to speak to the media.
While exports are expected to be supported in September and October by India’s Diwali festivities, competitive soyoil prices and colder year-end temperatures, which causes palm to solidify, could cap demand in key markets during the fourth quarter.
“Soyoil is lower due to record soybean crops and one of the longest runs of fantastic crush margins all over the world,” said Santhosh Kumar, chief executive of Singaporean trading and consulting company Arcis Global Merchants Pte Ltd.
“Soyoil also has an advantage over crude palm oil in India,” he said, referring to India’s higher import tax for palm oil versus soyoil.
($1 = 4.1390 ringgit)
Reporting by Emily Chow and Rajendra Jadhav; editing by Richard Pullin