May palm oil inventory rise 22% on year on higher production

Malaysia, a key supplier in the global palm oil market, saw its inventories jump 22% year on year in May on the back of higher production, data from the Malaysian Palm Oil Board released late Wednesday showed.

CPO production in May rallied to the highest level seen this year, recording a year-on-year increase of 9.28%, and a 6.92% month-on-month rise to 1,810,692 mt, MPOB data showed.

January-May production, however, fell 2.84% year on year to 7,281,582 mt, from 7,494,668mt.

Total palm oil stocks were consequently lifted to the highest level so far this year as well at 2,244,524 mt — a 22% year-on-year jump but only a 2.5% rise on April’s stocks.

Meanwhile, Malaysia’s exports in May matched higher production volumes, rising 37.3% month on month to 1,613,566 mt.

Malaysia’s May imports of palm oil ticked up 55.5% month on month but almost doubled on a yearly comparison at 101,108 mt. The country imported 50,698 mt of palm oil in May 2014.

This implies that around 298,234 mt of CPO was being consumed locally in the country in both the olein and biodiesel sectors. The benchmark third-month CPO contract for September on the Bursa Malaysia inched up a marginal RM1 to RM2,291/mt ($613.94/mt) in early trade Thursday from Wednesday’s close.

Last week, the Malaysian government announced that it was targeting to raise its biodiesel mandate from B7 currently to B10 from October this year, which is in accordance with the Euro 2M specifications, in a move largely viewed as one to support its local palm oil industry.

The proposed B10 mandate would lift Malaysia’s crude palm oil consumption by 43% from 700,000 mt currently to 1 million mt, when the mandate is fully implemented.