Nikkei Asian Review (11/03/2019) - KUALA LUMPUR (Nikkei Markets) -- Malaysia's palm oil inventory unexpectedly rebounded in February, rising 1.3% from a month earlier as exports fell faster than output, clouding prospects of a potential uptick in prices amid feeble demand and supply glut.
Stockpile in Malaysia, the world's largest palm oil producer after Indonesia, totaled 3.05 million tons in February compared with 3.01 million tons in January, according to the Malaysian Palm Oil Board. Export of the commodity plunged 21% to 1.32 million tons compared with January's shipment of 1.68 million tons.
Output meanwhile fell 11% month-on-month to 1.54 million tons from 1.74 million tons. Shares of plantation companies and crude palm oil prices fell on Monday following the provisional data release.
The surprise increase in stockpile and sharper-than-expected drop in exports may weigh on palm oil prices in the near-term, keeping prices below 2,150 ringgit ($525.8) a ton, said Palm Oil Analytics' Sathia Varqa.
Drop in domestic consumption to a five-month low is also a surprise given the start of mandatory B10 biodiesel program that is expected to absorb more feedstock, he added.
The benchmark palm oil futures for three-month forward delivery have shed 0.2% year-to-date, trading around 2,120 ringgit per ton Monday on Bursa Malaysia Derivatives. Palm oil prices fell more than 15% in 2018 as stockpile rose to record high in Malaysia amid subdued global demand.
In terms of markets, exports to China slumped nearly 75%, more than offsetting a surge in shipments to India-the world's biggest importer of vegetable oil-which rose 41% in February when compared to previous month, latest data showed.
"It's mainly because of poor exports number from China as it was a shorter month and there was a long holiday break," said Public Investment Bank's Analyst Chong Hoe Leong. "It's not a normal trend and the export numbers should go back to normal levels in March."
Top industry analysts at an industry conference last week estimated palm oil prices to edge higher this year as production slows, while Malaysia and Indonesia roll out aggressive steps to boost local demand and help reduce the massive global stockpile.
Malaysia has proposed to limit palm oil acreage to 6.5 million hectares by 2023, and expanded the so-called biodiesel programs to help raise consumption in the immediate term, in a bid to lift prices of the edible oil that is used in everything from snacks to cosmetics.
Malaysia rolled out B10 biodiesel, a blend of 10% palm oil and 90% petroleum diesel, for the transport sector on Feb 1. It already trails Indonesia, which introduced B20 - a blend of 20% palm oil and 80% fossil fuel - to its transport sector in 2016.
Shares of Sime Darby Plantation, the world's largest palm oil producer by acreage, ended unchanged at 5.1 ringgit apiece, while the broader Bursa Malaysia Plantation Index fell 0.2%.
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