Malaysian palm oil braces for tough 2000

Malaysian palm oil braces for tough 2000

KUALA LUMPUR (Reuters): Malaysia's palm oil production grew faster than exports last year amid weakening prices and the scenario may not improve in 2000, traders said on Thursday.

Production jumped 27 percent in 1999, but exports, the trade's main concern, grew slower at 18 percent, the latest data from the Palm Oil Registration and Licensing Authority (PORLA) showed.

PORLA on Thursday released its report on December production, closing stocks and exports, giving a glimpse into the industry's performance in 1999.

It said production for December was at 905,994 tons. This when added to the output in the first 11 months of 1999, totalled 10.55 million tons, up 27 percent from 1998's 8.32 million tons.

Exports for December were at 867,242 tons, PORLA said, bringing last year's total to 8.79 million tons when added to exports between January and November.

In 1998, exports stood at 7.42 million.

"This means exports for the whole of 1999 have only grown 18 percent, while production grew nine percent more," said Nakul Rastogi, a palm oil futures trader at Pacific Interlink Sdn Bhd.

Rastogi points to something that he says worries him more -- a closing stock of 1.18 million tons in December 1999 compared to 825,604 tons in December 1998.

"This means we're carrying forward more oil this year."

He said if last year's production was maintained, Malaysia may well have more than 12 million tons of palm oil in 2000 against a backdrop of deteriorating demand. "The way exports are going, I doubt things could improve."

The palm oil market has become increasingly concerned over weakening exports since last month.

Cargo surveyor Societe Generale de Surveillance (SGS), whose figures are closely watched by the industry, on Thursday said exports fell to 420,459 tons in the first 20 days of January compared to 594,847 in the same period of December.

Rastogi estimated exports could drop between 200,000 and 250,000 tons in January from December.

Private crop forecaster Ivan Wong -- a guru for the palm oil market -- this week forecast exports in January at 675,000 to 685,000 tons, February at 645,000 to 650,000 and March at 700,000 to 705,000 -- all lower than December.

Wong also increased his production estimates for the first three months of this year by between 60,000 and 65,000 tons for each month, against earlier estimates.

"It's okay if we produce more but demand is now bad, with even India cutting back," said another futures dealer.

Top-buyer India recently raised import duties on refined edible oils by 11 percent, putting Malaysian palm oil in a fix.

Local traders familiar with India's vegetable oils industry said until the duty hike, refined palm olein and palm stearin from Malaysia was the main choice for Indian buyers to convert into vegetable ghee, a staple fat.

The traders said Malaysia itself had high export taxes on crude palm oil (CPO) as it preferred to sell refined oil, which fetched better prices.

India took up 60,000 tons of CPO from Indonesia in January to offset the cutback in Malaysian oil.

SGS said India bought 113,521 tons of Malaysian oil between January 1 and 20, down from 156,319 in the same period December.

Dealers said prices of palm oil futures also looked bleak, opening the year little changed from the average of 1,462 ringgit a tonne in 1999. In 1998, prices averaged 2,391 ringgit a tonne.