(Updates prices in sixth paragraph.)
Sept. 6 (Bloomberg) -- Palm oil stockpiles probably increased in August as output in Malaysia, the second-largest producer, advanced for a sixth month to the highest level this year, according to a Bloomberg survey.
Production climbed 3 percent to 1.72 million metric tons from 1.67 million tons in July, the median of six estimates from plantation companies, analysts and traders showed. That would be the highest since December, according to data from the Malaysian Palm Oil Board. Reserves expanded 3 percent to 1.71 million tons, while exports gained 6.3 percent to 1.51 million tons, the survey showed. Imports declined 20 percent to 40,000 tons, according to the median of five estimates. The board will publish the data on Sept. 10.
Palm, used in everything from candy to biofuel, is produced year-round with supply accelerating in the second half because of growing cycles. While output jumped 18 percent in July from a month earlier, growth in production slowed in August as workers were on leave for the Eid festival, said Abah Ofon, a Singapore- based analyst at Standard Chartered Plc.
“Even if we had to discount the break during Eid, I don’t think we would have seen a huge increase in output,” Ofon said in a phone interview. “One of the things we’re coming to terms with is that we’re not going to see similar expansion in production as we saw last year. Just looking at the way output trended in April, May and June, there’s reason to believe that you won’t see a huge spike in the second half.”
Production from April to June fell 1.3 percent from the first quarter compared with a 12 percent surge a year earlier, board data show. Production may be unchanged or slightly lower in 2013 from 18.8 million tons last year, said Ofon.
Palm oil for November delivery climbed 1.3 percent to close at 2,444 ringgit ($735) a ton on the Bursa Malaysia Derivatives. Prices gained 7.5 percent in August, the biggest monthly gain since December 2010, supported by a rally in soybeans on concern hot, dry weather in the U.S. Midwest would hurt crops. Soybeans are crushed to make a substitute oil.
The median survey estimate for reserves in August was about 19 percent lower than the 2.11 million tons a year earlier, according to board data. End-year stockpiles will not reach the record 2.63 million tons in December, said Ofon.
“While we have a big decline in inventories, I don’t think we’re going to see a huge rally,” said Ofon. “I would expect a slight pullback in prices because demand tends to be relatively weak at this time and we’ll also see an improvement in soybean yields as we head into the harvest in the U.S.”
Global palm stockpiles will surge 21 percent to a record 9.7 million tons by the end of 2013-2014, while demand expands 4.6 percent, the least in 12 years, the U.S. Department of Agriculture estimates.
Demand will recover next month as India buys before the Diwali festival which falls in November, said Ofon. Imports by India, the world’s biggest consumer, declined for the first time in three months in July after a slump in the rupee to a record increased costs for refiners.
Inbound shipments of crude and refined palm oils dropped 5.2 percent to 568,254 tons from 599,128 tons a year earlier, the Solvent Extractors’ Association of India said on Aug. 14.
Aug. 2013 (Survey) July 2013 (MPOB) Aug. 2012 (MPOB)
Output 1.72 1.67 1.66
Stockpiles 1.71 1.66 2.11
Exports 1.51 1.42 1.44
Imports 0.04 0.05 0.065
Figures are in millions of tons.
--Editors: James Poole, Thomas Kutty Abraham