Malaysia’s palm oil inventories jumped to more than 2 million tonnes in April, well above expectations, as production surged to a six-month high and coronavirus lockdowns led to a slump in demand, industry data showed on Tuesday.
End-April stockpiles in the world’s second-largest palm producer rose 18.3% from March to 2.05 million tonnes, the highest since December 2019, the Malaysian Palm Oil Board (MPOB) said.
Production improved for a second month in April after lower fertiliser usage and dry weather last year had curbed yields, also climbing 18.3% from March to 1.65 million tonnes.
“Increased harvesting and processing activities before the start of the Muslim holy month of Ramadan and the seasonal production uptrend kept numbers high,” said Sandeep Singh, director of The Farm Trade, a Kuala Lumpur-based consulting and trading firm.
At the same time, Malaysia’s domestic consumption of the edible oil fell 40% from the previous month, analysts estimated, as a two-month partial lockdown to stem the spread of the coronavirus outbreak shuttered hotels, restaurants and canteens.
“A massive drop in domestic consumption led to a surge in end-month stocks to surpass 2 million tonnes,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.
Despite coronavirus-driven lockdowns around the world hurting global demand for palm oil, Malaysia’s exports in April rose 4.4% from the month before to 1.24 million tonnes, according to MPOB data.
A Reuters poll had pegged April inventories to rise 10% from the month before to 1.91 million tonnes. April production was likely to grow 15% while exports were forecast to rise 4% from March.
The pandemic has dragged down palm oil prices, with Malaysia’s benchmark crude palm oil contract hovering near a 10-month low on Tuesday at RM2,014 per tonne.
“We may see crude palm oil prices retracing further to RM1,950-1,900 on this supply data,” Marcello Cultrera, institutional sales manager and broker at Phillip Futures in Kuala Lumpur.
Following is a breakdown of the Malaysian Palm Oil Board figures and Reuters estimates for March (volumes in tonnes):