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Palm oil stocks in Malaysia peaked at nearly three years at the end of September

KUALA LUMPUR: Malaysia’s palm oil stocks likely rose to their highest in nearly three years during the peak production season in late September, a Reuters survey found on Wednesday.

Inventories rose 8 percent in August to 2.27 million tons, the highest since October 2019, according to the median estimate of nine traders and analysts polled by Reuters.

Production from the world’s second largest producer rose for the fourth straight month. It grew by 2 percent to 1.76 million tons.

Exports rose 8 percent to 1.41 million tons as top buyer India stocked up on the edible oil ahead of the Diwali festival in October.

India’s palm oil imports rose to their all-year high in September, boosted by strong demand for tropical oil ahead of the festival season and a significant discount compared to competing oils.

Demand for palm oil has been subdued as severe COVID-19 restrictions and intermittent lockdowns in major importer China have hurt consumption levels, weighing on the benchmark futures contract.

Investors will look forward to any announcement of an easing of China’s zero-COVID policy during the ruling Communist Party’s national congress starting Oct. 16, a Kuala Lumpur analyst said.

“As the country begins to return to a new post-COVID standard, demand can be expected to pick up,” the analyst said.

Indonesia, the world’s largest producer of palm oil, can extend an exemption from export duties on the edible oil until the end of this year. Cheaper Indonesian exports could take away the demand from Malaysia.

The Malaysian Palm Oil Board (MPOB) will release its data on October 11.

Breakdown of September estimates (in tonnes):

Reach median

Production 1,725,781-1,780,000 1,760,000

Export 1,320,000-1,494,600 1,410,000

Input 75,000-150,000 102,000

Closing stocks 2,158,600-2,384,641 2,265,000

* Official inventories of 2,094,667 tons in August plus the above estimated production and imports give a total September supply of 3,956,667 tons. Based on the median exports and estimated closing stocks, Malaysia’s domestic consumption in September is estimated at 281,667 tons.

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