July 4, 2018 / 10:23 AM / 9 months ago

PREVIEW-Malaysia palm oil stockpiles seen falling to nine-month low in June

    * June stocks seen at 2.15 mln T, down 1.2 pct from May
    * Output forecast to fall 11.1 pct from May to 1.36 mln T
    * Exports estimated to drop 7.8 pct to 1.19 mln T
    * Malaysian Palm Oil Board data due on July 10

    By Emily Chow
    KUALA LUMPUR, July 4 (Reuters) - Malaysia's palm oil
inventories are forecast to have dropped to a nine-month low in
June as production in the world's second largest producer fell
faster than exports, according to a Reuters survey.
    Low stockpiles could support benchmark palm oil prices
 which slid 4 percent in June as weak demand pummeled
futures to a nearly two-year low.
    Palm oil inventories dipped 1.2 percent from May to 2.15
million tonnes at end-June, declining for a sixth straight
month, MYPOMS-TPO, according to the median estimate among
eight planters, traders and analysts surveyed by Reuters.
    Production last month is forecast to have declined 11.1
percent from May to 1.36 million tonnes. That would be its
sharpest monthly fall and lowest level since February. It would
also be the weakest output for June since 2007. MYPOMP-CPOTT
    Poll respondents said the production drop was largely due to
plantation workers across Malaysia taking leave during the
Muslim festival of Eid in mid-June.
    "We attribute the larger than historical average
month-on-month fall in output to lower productivity as many
workers took time off," said Ivy Ng, regional head of
plantations research at CIMB Investment Bank.
    Ng said the sharpest production declines were seen in Sabah,
Peninsular Malaysia and Sarawak. The East Malaysian states of
Sabah and Sarawak are the country's two largest palm oil
producing states.
    The post-holiday labour shortage in Malaysia and a backlog
of farmers trying to sell fruit to Indonesian mills could drag
down palm oil output in the world's two biggest producers.

    Malaysia's exports are expected to have fallen 7.8 percent
from May to 1.19 million tonnes in June, declining for a third
month in a row and the smallest export volume in more than a
year, according to the poll. MYPOME-PO
    "Buying from China and the European Union was lower in
June," said a Kuala Lumpur-based trader, following higher
purchases in previous months.
    "In anticipation of higher production in Malaysia, they
could be trying to reduce their purchases," he said, referring
to an expected seasonal rise in production during the third
quarter of the year which usually pressures prices.     
    The official data will be released by the Malaysian Palm Oil
Board ‪after 0430 GMT on July 10.
    The median figures from the Reuters survey puts Malaysia's
consumption last month at 227,555 tonnes.
    Breakdown of June estimates (in tonnes):
                         Range              Median
 Production      1,321,000 - 1,600,000     1,356,500
 Exports         1,159,000 - 1,400,000     1,190,000
 Imports            30,000 - 60,000         35,624
 Closing Stocks  1,957,668 - 2,193,000     2,145,000
* Official stocks of 2,170,431 tonnes in May plus the above
estimated output and imports give a total June supply of
3,562,555 tonnes. Based on the median of exports and closing
stocks estimate, Malaysia's domestic consumption in June would
be about 227,555 tonnes.

($1 = 4.0420 ringgit)

 (Reporting by Emily Chow 
Editing by Manolo Serapio Jr.)
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