Insights gathered from market players suggest that the release of the latest Malaysian Palm Oil Board (MPOB) report on 12 November may hold surprises. While alignment exists among market players on certain metrics, debate surrounds others.
Among the market participants surveyed by Mintec, expectations indicate a potential 6%-8% decline in palm production in Malaysia for November, compared to October. This decline aligns with the usual seasonal reduction in production as both Malaysia and Indonesia enter this phase. Conversely, exports have displayed resilience, Increasing by an estimated 4-7%.
Notably, India and China had ramped up purchasing volumes, ahead of holidays and festivals, sparking a minor rally in palm oil prices across Asian and European markets. However, this momentum has waned in part due to economic concerns emanating from China. The recent downgrade of China's economic outlook by rating agency Moody's has begun to impact market sentiment. Moreover, internal estimates provided by market players to Mintec suggest that China's continuous stock levels could exceed 900,000 metric tonnes, marking the highest sustained stock levels in several months.
Considering the anticipated surge in exports and the concurrent dip in production, market players anticipate a 3%-4% reduction in ending stocks for Malaysia in November compared to October. Despite this seemingly marginal decrease, industry insiders are approaching the situation cautiously, primarily focusing on bargain buying, as observed within the industry.
Expressing this sentiment, a palm oil trader informed Mintec, "Demand has been lacklustre over the last week or so, and despite the likelihood of end stocks decreasing, which would typically be bullish, we still require sustained demand for substantial impact."
Mintec plans to issue an update on this narrative tomorrow following the release of the MPOB report.
