Palm Oil May Drop After Malaysian Stockpiles Gain 5.7 Percent

June 10 (Bloomberg) -- Palm oil futures in Malaysia, little changed, may decline as the supply outlook improved after the country’s inventory increased for the first time in six months.

Stockpiles in Malaysia, the world’s second-largest producer, surged 5.7 percent to 1.37 million metric tons in May from a month earlier, data from the country’s Palm Oil Board released during today’s trading break showed. Output climbed 8.5 percent to 1.4 million tons, while exports increased 2.3 percent to 1.2 million tons, the board said. April palm oil stockpiles were the lowest since June 2007.

“While we are positive on our outlook for crude palm oil for 2010, we believe that now is not the opportune time for investors to take a long position,” Macquarie Research analyst Sunaina Dhanuka said in a report today. “Crude palm oil fundamentals are likely to deteriorate in the third quarter.”

August-delivery palm oil on the Malaysia Derivatives Exchange added 5 ringgit, or 0.2 percent, to 2,470 ringgit ($703) a ton at the 12:30 p.m. trading break.

Palm oil for September delivery on the Dalian Commodity Exchange in China, the world’s biggest user, dropped 0.8 percent to 6,466 yuan ($946) a ton at the 11:30 a.m. trading break.

Earlier, independent cargo surveyor Intertek said Malaysia’s palm oil exports dropped to 289,437 tons in the first 10 days of June, down 28 percent from the same period in May.

PT Astra Agro Lestari, Indonesia’s biggest agricultural company by value, said its crude palm oil sales fell 5.5 percent in the first five months of the year as production dropped.

Palm oil in Malaysia, the benchmark contract, has surged 46 percent this year as soybean crops, crushed to make rival soybean oil, decline in Brazil and Argentina and soybean stockpiles in the U.S. are forecast to reach a five-year low.