DJ Malaysia End-March Palm Oil Stocks Likely Down 5%-6% -Trade

KUALA LUMPUR (Dow Jones)--Malaysia's palm oil inventories in March may have declined 5%-6% to around 1.68 million-1.70 million metric tons despite strong growth in production, as export demand for palm oil also improved, trade participants and plantation company executives said Thursday.

Crude palm oil futures have fallen 3.2% since March 1 under the weight of rising production. Plantation company executives said March crude palm oil output rose 7%-16% from the previous month.

However, end-March inventory numbers will likely decline because production may not be high enough to meet consumption, a senior trading executive based in Kuala Lumpur said.

The Malaysian Palm Oil Board is due to report output, exports and palm stocks data on Monday. CPO production was estimated at 1.16 million tons in February, while palm oil inventories at end-February were at 1.78 million tons, the MPOB said.

Export estimates by two cargo surveyors showed rising exports for March. Intertek Agri Services said shipments rose 12.1% to 1.35 million tons, while SGS (Malaysia) Bhd. said exports were up 7.7%, also at 1.35 million tons.

Analysts said March output rose significant on month because February was a shorter month and harvesting activities had spilt over to March, but growth reported by company executives came in a wide range from 7%-16%.

"Output at our palm estates has shown a single-digit increase (in March)," Lee Oi Hian, chief executive at Malaysia-based listed plantation company Kuala Lumpur Kepong Bhd. (2445.KU) said.

CPO production is likely to improve further in April, but the rise won't be "too much, as yields would be  affected by the El Nino-induced dry spell in the second half of 2009," a Malaysia-based planter said. A  prolonged dry spell lasting two successive months normally affects future yields.

Some trading executives put palm oil imports from Indonesia between 70,000 and 80,000 tons. Shipments from the world's largest palm oil-producing nation have likely risen due to a rush to ship out the oil to avoid ahigher export tax effective in April.

An official at Indonesia's Ministry of Trade said last month that it would raise the palm oil export tax to 4.5% this month from 3%.

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com