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Agriculture Asia Palm Oil

Malaysia September palm sales lag record pace of output

Malaysian crude palm oil sellers boosted their performance in September relative to August with an 8.3% rise in overseas shipments, according to fresh monthly inspection data. But overseas sales were still less than spectacular against the backdrop of record August palm oil production which hit 2.05mn t, leaving the Malaysian palm industry with an increasingly steep uphill battle to keep domestic palm oil stocks oil in check.

Two of Malaysia’s largest palm oil offtakes, China and the EU, both saw monthly sales drop sharply in August. Collectively sales to the EU and China were down more than 131,000t, with sales growth of 18,500t into Malaysia’s largest customer India offering scant consolation. Middle East, Asia and Africa were the biggest sources of Malaysian sales growth in August, with the Middle East taking 72% more crude palm oil MoM to push intake up 60,000t.

The Malaysian September sales experienced echoes Indonesia’s August sales data, which saw sales to China crash 36%, to the EU fall 30.5% and to India drop 17%. Full month official export data for Malaysia in August marked overseas sales down just over 2.2% MoM at 460,000t.

Malaysian palm oil stocks have been effectively trending higher since the start of 2010 amid almost uninterrupted YoY growth in output. Malaysian output looks set to smash previous annual records by the end of this year given annual production peaks seasonally between August and October before going into shallow decline through December.

But this year the market will be on guard for any signs of a slowdown in southeast Asian output in September amid heightened awareness of the potential fallout from a strong El Nino effect coupled with the potential damage to plantation yield following bad Indonesian forest fire smoke problems, which can interrupt photosynthetic development of palm fruits. Malaysian palm oil futures prices have been a rare focus of strength in the beleaguered commodities complex since late August, rallying in dollar terms around $100/t or just under 24% relative to much larger gains when denominated in weakening Ringitts.

LM/MS 30/09/2015

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