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

Strong points

Surprising stocks higher than expected

November production well below estimate

Bearish data could push palm oil futures down: analysts

Malaysia’s palm oil exports in November rose 3.3% on the month to 1.47 million tonnes, falling short of market expectations of double-digit growth, according to data released by the Malaysian Palm Oil Board December 10.

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November’s exports diverged from major market studies, which indicated growth of more than 10%. A median estimate from seven industry watchers in a poll released Dec. 9 by S&P Global Platts expected Malaysian exports to rise 10.9% month-on-month to 1.57 million tonnes.

End-November stocks of the world’s second-largest palm oil producer edged down to 1.82 million tonnes, according to MPOB data, exceeding market expectations of 1.78 million tonnes, as slower exports offset a drop in exports. drop in production.

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

“Stocks at the end of November haven’t dropped much … It’s a shock to the market as the average trade estimate was in the range of 1.72 million to 1.78 million tonnes,” said Bagani, adding that it is possible that palm oil in late December stocks may reach 2 million tonnes.

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

In 2021, the MPOB set the average end-of-month stocks for the January-November period at 1.59 million tonnes.

Production below expectations

Malaysian palm oil production fell to 1.64 million tonnes in November, down 5.3% from the previous month, according to MPOB data from December 10.

November production was below market expectations of a 1% drop from October to 1.70 million tonnes, a Platts survey showed.

“We forecast a production drop of more than 7% in December, so all eyes will be on demand, especially in the first quarter of 2022,” Supramaniam, director of the Selangor-based brokerage firm, told Platts Paramalingam. , Pelindung Bestari.

Bearish report for the markets

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

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

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

The recent drop in crude oil prices, downgrades by Chinese developers and palm oil prices almost on par with sweet oils for spot months, as well as weak seasonal demand will weigh on prices, Sandeep Singh , director of the Kuala Lumpur-based trading and consulting company. , The Farm Trade, Platts said.

Steve R. Hansen