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Agriculture Asia

All eyes on Indonesia as Malaysia reports August palm output surge

Monthly Malaysian palm oil data reporting a surge in August output to a new record high coupled with weakening exports failed to rattle a futures market fixated on potential fallout from poor Indonesian rainfall which has largely passed Malaysia by. Front month futures remain 12.5% higher than their recent late August bottom after an uninterrupted two week rally, greatly outstripping still struggling US markets for beans and bean oil ahead of tomorrow’s WASDE.
Stagnant exports relative to a 13% production surge MoM stoked a 16.5% rise in Malaysian stocks from July to August to 1.465mn t. Chinese and Indian buyers both took almost 100,000t each less palm oil than in July, with a 43,000t gain in EU offtake offering small consolation. Malaysian biodiesel exports also crashed back to around 16,000t in August after a hopeful upswing in July to 46,000t, despite greatly improved economics in August for palm relative to competing rape and soybean oil.
The flatlining overseas sales figures come despite at least three months of poor rainfall in neighbouring Indonesia, coupled with Indonesian exporters’ fresh cost disadvantage following the imposition of a $50/t export tax to fund the government’s ambitions towards achieving a B20 biodiesel blend nationwide. Indian palm stocks remain high after record palm buying in May and July, with a possible move to hike Indian import taxes to give some breathing space to struggling domestic oilseed crushers high on southeast Asian palm producers’ list of worries.
India last month imposed a 10% import duty on wheat alongside higher levies onmetals imports. FAS meanwhile expects China’s palm oil appetite to drop around 5% this year as record soybean imports continue to steal market share from non-animal feed eligible palm oil producers.

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