Malaysia’s end-Nov palm oil stocks, exports diverge from market expectations

Malaysia’s November palm oil exports rose 3.3% on the month to 1.47 million mt, missing market expectations of a double-digit growth, data released by the Malaysian Palm Oil Board showed Dec. 10.

November exports diverged from major market surveys, which pointed to growth of over 10%. A median estimate of seven industry watchers in a poll published Dec. 9 by S&P Global Platts expected a 10.9% month-on-month rise in Malaysian exports to 1.57 million mt.

End-November stocks at the world’s second largest palm oil producer fell marginally to 1.82 million mt, according to the MPOB data, higher than market expectations of 1.78 million mt as slower exports offset a dip in production.

“Lots of surprises, mainly the export numbers, which were way off from the surveyors and trade estimates,” Anilkumar Bagani, head of research at Mumbai-based Sunvin Group said in a note.

“The November end stocks did not fall much… This is a shock to the market as the average trade guess was in the range of 1.72 million-1.78 million mt, Bagani said, adding that it is possible that end-December palm oil stocks may reach 2 million mt.

Malaysia’s average monthly stocks ranged above 2.5 million mt in 2018 and 2019, however, as production slowed down during the pandemic, month-end stocks averaged 1.72 million mt in 2020, according to the MPOB data.

In 2021, MPOB pegged average month end stocks for the January-November period at 1.59 million mt.

Production below expectations

Malaysia’s palm oil production fell to 1.64 million mt in November, down 5.3% from the month before, the MPOB data showed Dec. 10.

The November output was lower than the market’s expectation of a 1% dip from October to 1.70 million mt, Platts survey showed.

“We are pegging December production to dip by more than 7%, thus all eyes will be on demand especially in the first quarter of 2022,” Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari, told Platts.

Bearish report for markets

Calling the November MPOB data a “surprise” in terms of inventory and demand, Marcello Cultrera, an investment broker at Phillip Futures, said the report was bearish — a view that was echoed by multiple market sources.

“Keeping in view higher-than-expected stocks, third month crude palm oil futures on the BMD [Bursa Malaysia Derivatives] are likely to test the support levels downside. However, anticipation of seasonal decline in December 2021 production and flattish exports for Dec. 1-10 reported today [Dec. 10] are likely to keep the downside limited,” Aditya Jeripotula, research head at TransGraph Consulting said.

Malaysian palm oil futures crossed a record high MR 5,000/mt ($1,185.40) in October and again in early November, but corrected after the emergence of the COVID-19 omicron variant threatened international markets.

The recent dip in crude oil prices, downgrades on Chinese developers, and palm oil prices almost on par with soft oils for spot months, along with seasonally low demand will weigh on prices, Sandeep Singh, director of Kuala Lumpur-based trading and consulting company, The Farm Trade, told Platts.

S&P Global Platts

Tags: Malaysia, palm oil, stocks