Malaysian palm oil futures notched their third straight day of losses on Wednesday after an industry report showed inventories in the world's second-biggest producer swelled to a six-month high in May. The Malaysian Palm Oil Board released figures showing palm inventories at the end of May rose 2.5 percent to 2.24 million tonnes, their highest since November, against market estimates for a fall to 2.14 million tonnes.
The rise in inventories may pull the plug on palm's short-lived rally to an over three-month top on Monday, which was boosted by anticipation of bigger biodiesel consumption and the ringgit currency which slid to nine-year lows. "The higher stockpile was due to stronger-than-expected output which is negative for the near-term crude palm oil price," said Ivy Ng, regional head of plantations research at CIMB Investment Bank.
"We expect stocks to rise further in June, driven by the seasonally-higher CPO output. This could dampen CPO prices unless demand picks up significantly or poor weather caused by El Nino adversely affects production," Ng added. The August palm oil contract on the Bursa Malaysia Derivatives exchange fell 1.2 percent to 2,290 ringgit ($613.53) a tonne by the day's close.
Total traded volume stood at 29,243 lots of 25 tonnes each, below the usual 35,000 lots. Cargo surveyor Intertek Testing Services on Wednesday reported that exports of Malaysian palm oil products for June 1-10 rose 2.2 percent to 468,975 tonnes from 458,677 tonnes shipped during May 1-10, signalling a slowdown to robust buying last month. Another surveyor Societe Generale de Surveillance reported a 1.9 percent increase in the same period. In other vegetable oil markets, the US July soyoil contract rose 0.4 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange was flat.