Indonesian palm oil stocks in July at a 5-year low amid increased biodiesel production and higher demand

Data from a leading industry group showed that Indonesian palm oil inventories fell 10.82% from the previous month to a 5-year low of 2,51 million metric tons as demand for biodiesel grew and production decreased, according to data released on Wednesday.

The benchmark Malaysian futures could be supported by falling stocks in Indonesia. Indonesia is the world's largest producer and consumer.

Food sector consumption was 5.76 million tonnes, which is 5.18% less than last year. Biodiesel consumption was 6.44 million tonnes, which is 10.84% more than the previous year.

Indonesian domestic consumption increased by 2.17% in the first seven month of this year to 13.51 millions tons. This was due to the increase in biodiesel blends, as the country implemented 35% palm-based biodiesel blends known as B35.

In July, palm oil shipments from Indonesia, the largest palm oil exporter in the world, fell 33.3% monthly to 2,24 million tons.

The decline in production from May to July has put pressure on stocks.

"The production in the last couple of months has dropped." "Since August, the output increased and so will the stock," said GAPKI Secretary General Hadi Sugeng.

New Delhi-based trader with a global trading house stated: "The stock of 2.5 million tonnes is smaller than market expectations." This shows that Indonesia is able to manage its supplies well, even if production increases this month. Reporting by Bernadette Cristina in Jakarta and Rajendra Jhadhav in Mumbai, edited by John Mair & Mark Potter

(source: Reuters)