Malaysia Palm Stocks to Peak in December, Mistry Says

Nov. 8 (Bloomberg) -- Malaysian palm oil stockpiles will reach a peak of 2.1 million metric tons at the end of December before likely declining in the new year, Dorab Mistry, director of Godrej International Ltd., said.

“Whilst this figure may seem daunting, it will represent less than six weeks consumption,” Mistry said in comments prepared for delivery at a conference in Guangzhou, China. “It is likely that stocks will decline from January or latest from February onwards.” Malaysia is the second-biggest producer of palm oil, which competes with soybean oil for use in cooking and biodiesel.

Rising stockpiles could ease concerns of an oilseed shortage, which has helped lift palm oil prices by 33 percent this year. Inventories in Malaysia rose 12 percent to 1.58 million tons in September from August, an eight-month high, the nation’s palm oil board said on Oct. 12.

“After a few weeks, as demand from China and India returns, I expect crude palm oil futures to begin to rise and to attain my target of 2,400 ringgit in the first quarter of 2010,” said Mistry, whose speech was delivered in his absence as he was unable to attend the conference.

Palm oil stockpiles in Indonesia, the world’s biggest producer, will also increase in the coming months because of higher output, Derom Bangun, a deputy chairman of Indonesia’s Palm Oil Board, said Nov. 2.

Inventories probably rose to 1.7 million metric tons in October, compared with the August and September average of 1.3 million tons to 1.4 million tons, he said.

‘Question Mark’

Mistry had previously forecast that Indonesian production would gain by 2 million tons in 2010 and Malaysian output by 500,000 tons. Still, he said a possible resurgent El Nino event “puts a question mark on those optimistic estimates.”

“A new stronger El Nino will have a profound effect on crude palm oil production in the June to September period of 2010,” Mistry said. The El Nino weather phenomenon can cause drought in parts of Asia, affecting crops.

January-delivery palm oil last traded little changed at 2,246 ringgit ($660) per ton on the Malaysia Derivatives Exchange on Nov. 6.

--Feiwen Rong. Editors: Richard Dobson, Sean Collins.