KUALA LUMPUR (Nikkei Markets) -- Malaysia's October oil palm inventory swelled for the fifth straight month as production rose while exports fell, and the 10-month high stockpile reading dragged shares of palm plantation companies lower.
Stockpile in Malaysia, the world's second-largest palm oil producer after Indonesia, was 2.72 million tons in October, 7.5% higher than the 2.53 million tons surplus in September, according to Malaysian Palm Oil Board. Output rose 5.9% to 1.96 million tons month-on-month from 1.85 million tons.
Palm oil futures and shares of planters fell following the provisional data release. The figures may be revised later.
Analysts said prices of the edible oil used in everything from snacks to cosmetics are likely to remain under pressure in the months ahead due to weak global demand even as inventory expanded at a slower than expected pace in October.
"End-month stocks rose at just half of what was expected," said Sathia Varqa, co-founder of Singapore-based online publisher Palm Oil Analytics. "Report is seen as less bearish than market expected."
Production of palm typically enters its peak season in the third and final quarter of the year during the wettest months in Malaysia. Palm oil prices have declined more than 12% so far this year amid concerns over sluggish demand and rising supply.
Output is expected grow 3.5% to 20.5 million tons in 2019 as more plantations mature, while prices could improve to 2,400 ringgit ($576.86) per ton from an average 2,300 ringgit per ton this year as stronger exports deplete the stockpile, according to government forecasts.
Exports fell 3.1% to 1.57 million tons in October as compared with 1.62 million tons in September.
In terms of markets, shipments to India, the world's biggest importer of vegetable oil, plunged 56% to 99,293 tons from a month earlier, while exports to China nearly doubled month-on-month to 213,608 tons in October. Exports to Pakistan edged 0.3% higher to 105,299 tons in October.
"I think price is likely to trade around 2,000 ringgit until end year," said Public Investment Bank Analyst Chong Hoe Leong. "For the sector, performance will be weak except for IOI and KLK as both companies are integrated producers, which act as a hedge against lower CPO prices."
The most traded crude palm oil futures contract on Bursa Malaysia Derivatives for January delivery fell 0.3% to 2,034 ringgit on Monday.
Sime Darby Plantation, the world's biggest palm oil producer by acreage, fell 1.7% to 5.16 ringgit in Kuala Lumpur. The benchmark FTSE Bursa Malaysia KLCI meanwhile was down 0.7%.