By Mei Mei Chu

KUALA LUMPUR (Reuters) – Malaysia’s palm oil inventories fell more than expected in February as production declined to its lowest in five years and imports plunged, industry regulator data showed on Wednesday.

Stockpiles in the world’s second-largest producer of palm oil fell 1.8% from January to a three-month low of 1.3 million tonnes, according to Malaysian Palm Oil Board (MPOB) data. [MYPOMS-TPO]

Crude palm oil production fell 1.85% from the previous month to 1.11 million tonnes, marking a fifth straight month of declines, as a labour shortage and adverse weather conditions continued to curb yields. [MYPOMP-CPOTT]

“Production was lower compared to market estimates,” said Marcello Cultrera, institutional sales manager & broker at Phillip Futures in Kuala Lumpur.

“Imports which saw a 47% month-on-month decline were way lower while domestic consumption were higher than expectations,” he added.

Exports slumped 5.5% to 895,556 tonnes, their lowest since February 2007, the MPOB said. [MYPOME-PO]

However, a weakening ringgit is expected to boost demand in the second half of March, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

The ringgit — palm’s currency of trade — fell 0.3% against the dollar on Wednesday, making the commodity cheaper for holders of other currencies. It has lost nearly 3% of its value so far this year.

Malaysia is in talks with Saudi Arabia to increase the kingdom’s imports of the edible oil to 500,000 tonnes from around 300,000 tonnes in the near future, state media Bernama reported on Wednesday.

 

(Reporting by Mei Mei Chu; Editing by Christian Schmollinger and Aditya Soni)