Palm Oil Drops for Second Day on Inventory Concerns in Malaysia

Nov. 11 (Bloomberg) -- Palm oil dropped for a second day on concern a seasonal decline in China’s demand ahead of winter may add to Malaysian stockpiles that soared to a 10-month high.

Inventories of the world’s cheapest edible oil surged 25 percent to 1.97 million metric tons in October from a month ago, the Malaysian Palm Oil Board said yesterday. Output reached a record 1.99 million tons, the board said.

“We expect slower China palm oil imports in the near term as winter approaches,” said Liong Chee How, analyst at Kenanga Investment Bank Bhd., in a note to clients today.

Winter demand for palm oil slows as the tropical oil clouds in cooler climes.

January-delivery futures declined as much as 0.8 percent to 2,225 ringgit ($658) a ton on the Malaysia Derivatives Exchange, and paused at 2,233 ringgit at the 12:30 p.m. break. The price rose as much as 0.8 percent in intra-day trading.

The tropical commodity may average 2,400 ringgit next year because of higher crude oil prices, compared with 2,200 ringgit forecast for this year, Liong said.

LMC International, an industry consultant, yesterday pared its forecast for palm oil because of the “incredible” increase in stockpiles. The price may reach 2,375 ringgit by April, down from 2,625 ringgit announced just a day earlier.

Output of India’s monsoon-sown oilseeds such as soybeans and peanuts, harvested from late September, may drop 15 percent to 15.23 million tons from a year earlier, according to India’s farm ministry. Vegetable oils consumption will gain 500,000 tons in the year to October 2010 on strong economic growth, Dorab Mistry, director of Godrej International Ltd., said Nov. 8.

India Drought

“Exports to India and Pakistan should stay strong as drought in India has threatened oilseeds output,” Liong said.

Malaysia’s palm oil exports tracked by Societe Generale de Surveillance jumped 22 percent to 421,311 tons in the first 10 days of November compared with the same period in the previous month. Shipments tracked by Intertek climbed to 403,302 tons from 339,195 tons, the surveyor said yesterday.

Soybean oil advanced as much as 1.2 percent, making it 28 percent more expensive than palm oil. January-delivery futures were at 38.30 cents a pound at 12:39 p.m. in Kuala Lumpur.

Crude oil declined for a second day and futures for December delivery traded at $78.79 a barrel at 1:31 p.m. Kuala Lumpur time.