Malaysian Palm Oil Stocks Sink to Nearly Two-Year Low

Persistent Decline In Palm Oil Stocks

Malaysian palm oil stocks fell for a fifth consecutive month in February to their lowest level in 22 months, driven by lower production even as exports also declined, according to data released by the industry regulator on Monday, 10 March.

Impact Of Falling Stocks On Futures

Traders said the decline in inventories in the world's second-largest palm oil producer after Indonesia could support benchmark futures prices, even as demand from price-sensitive countries weakens due to palm oil's continued price premium over soybean oil.

Malaysian Palm Oil Board Data

According to the Malaysian Palm Oil Board (MPOB), palm oil stocks at the end of February fell 4.31% from the previous month to 1.51 million tonnes, the lowest level since April 2023.

Floods Weigh On Production And Exports

Crude palm oil (CPO) production in February dropped 4.16% to 1.19 million tonnes, its lowest level in three years, after floods disrupted output. Palm oil exports also fell, down 16.27% to a four-year low of 1 million tonnes.

Reuters Poll Versus Actual Figures

A Reuters poll had forecast stocks at 1.48 million tonnes, with production at 1.16 million tonnes and exports at 1.05 million tonnes.

Market Analysis From Sunvin Group

Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group, said that although stocks came in slightly higher than market expectations, the ongoing supply squeeze caused by weaker production is likely to support prices.

Outlook For March Production And Exports

In March, Malaysian production is expected to improve, but exports are unlikely to rise significantly, as palm oil continues to trade at a premium to soybean oil, according to a Mumbai-based trader with a global trading firm.

India's Role In Supporting Prices

"Indian demand will be crucial in the coming weeks to support prices. Early indications suggest India is buying larger volumes to rebuild stocks," the trader added.

Long-Term Factors Weighing On Prices

Constrained production and Indonesia's push toward greater biofuel use, as the world's largest producer, could keep cooking oil prices elevated for years to come — factors that are making palm oil, traditionally known for being the cheapest edible oil, more expensive and stripping it of an advantage that previously helped drag down prices of competing oils.

Source: Reuters