Malaysia's March palm oil stocks probably fell to a 7-month low in March, as an increase in exports outpaced production growth, a Reuters survey showed on Friday. Stocks may have dropped 3.5 percent to 1.99 million tonnes in March - the lowest since August 2011 - as stronger demand from Europe eats in stocks, a median survey of five plantation houses showed.
Exports in March probably gained 5.7 percent to 1.28 million tonnes compared to a month ago, the first month-on-month increase since October last year. This was in part due to European demand picking up in March after a relatively slow month in February and a shift in demand to palm oil after the drought in South America limited soybean supply for crushing.
Malaysia's output for March likely inched up 2 percent to 1.21 million tonnes from February's 1.19 million tonnes. The forecast is still much lower than last year's 1.42 million tonnes due to the effect of biological stress after 12 months of a strong production up-cycle.
Malaysian imports of crude palm oil from top producer Indonesia were also seen to be recovering by 39 percent to 180,000 tonnes as a stronger global demand for palm oil drove up imports of the crude grade for refining. Market players are divided on the month-on-month palm oil production growth trend for top producers Indonesia and Malaysia, although most agreed output should be lower compared to last year as yields weaken following strong growth in 2011.
Demand outlook for palm oil strengthened further after a US Department of Agriculture report showed in end March that farmers will plant less soybean crop in coming months. Crude oil price staying above $120 a barrel could also see more soyoil shifted into the biodiesel sector, allowing palm oil to capture a larger share in the food sector.