Malaysia is producing palm oil faster than the world is taking it
Malaysian palm oil stocks jumped 0.69 Mt in September to 3.51 Mt, the most in over a decade, as output surged and exports fell for a third month. Shipping enough just to hold stocks flat would take a monthly pace Malaysia has not reached in years.
Malaysia has more palm oil in its tanks than at any point in over a decade. Stocks rose 0.69 Mt in September alone to 3.51 Mt, more than they gained over the first nine months of last year.
September brought two things together. The estates produced 2.12 Mt, 16% more than in August and nearly a fifth above a usual September, while exports fell to 1.12 Mt, the smallest September shipment in over a decade. Malaysia sold barely half of what it produced in the month, against more than three quarters a year earlier.
The buyers stepped back as the trees peaked
The slowdown did not start in September. From January to July, Malaysia shipped 9.14 Mt, a tenth more than a year earlier. Since then shipments have fallen three months running, from 1.40 Mt in July to 1.29 in August and 1.12 in September, just as production surged.
Part of the demand went to soy oil. India imported 0.74 Mt of soy oil in August, more than twice its usual intake for the month, while its palm purchases came in below their usual August level. Market feedback over the period described Indian buyers as largely absent from palm.
Nothing at home absorbed the difference. What Malaysia uses domestically, net of the oil it imports, has held around 0.3 Mt every month this year, and September was no exception.
What it would take to stop the build
Our reading is that the stock cannot come down while the estates produce at September's rate. With output at 2.12 Mt and 0.3 Mt used at home, Malaysia would have to ship about 1.8 Mt a month just to keep stocks where they are. That is more than it has exported in any single month in years, and 0.7 Mt above what it shipped in September. Indian buyers are reported to have come back in size last week, which is the first condition. Three signals in our data will show whether it goes further:
- October exports. A move back toward 1.8 Mt would mean buyers are taking the surplus. Another month near September's 1.12 would leave the stock building again.
- October production. If output eases from 2.12 Mt, the bar for exports comes down with it. If it holds, stocks keep rising even with a recovery in shipments.
- India's September imports. The split between palm and soy oil will show whether last week's buying marks a lasting return to palm or a one-off.
GrainBoard modules used in this note
For information only. Not investment advice.
Built with GrainBoard data
The supply & demand, trade-flow and price data behind this note, in one analytical workspace.