Palm oil reserves in Malaysia, the second-largest producer, contracted from an all-time high in January as production declined, according to official data today. The drop in reserves was less than expected and prices fell. Inventories shrank 1.9 percent to 2.58 million metric tons from 2.63 million in December, the Malaysian Palm Oil Board said today. That missed the median estimate for a fall to 2.53 million tons, according to a Bloomberg survey, and is 28 percent higher than a year ago. Output fell 10 percent to 1.6 million tons last month, while exports slid 1.6 percent to 1.62 million tons, the board said. Reserves in Malaysia and Indonesia climbed last year as production outpaced demand, pushing prices down 23 percent, the most since 2008. Rates may increase this year as economies rebound in China and India, the world’s biggest importers, the Indonesian Palm Oil Association said on Feb. 5. Malaysia had no tax on shipments last month in a bid to clear its stockpiles. “I don’t think there’s much of a catalyst for prices to recover� as the stockpiles remain high, James Ratnam, an analyst at TA Securities Holdings Bhd., said in Kuala Lumpur. The outlook for demand is also uncertain as India probably imported a large amount last month, Ratnam said. Palm oil for April delivery lost as much as 2.2 percent to 2,504 ringgit ($810) a ton on the Malaysia Derivatives Exchange, the lowest level for the most-active contract since Jan. 30, and was at 2,515 ringgit at 5:32 p.m. in Kuala Lumpur. Markets in Malaysia were closed on Feb. 11 and yesterday for a holiday. Tariff Revamp Malaysia said in October it would cut the export tax to between 4.5 percent and 8.5 percent, from about 23 percent, effective Jan. 1, to clear out the reserves. The tariff for last month and February was set at zero as the base price was below the threshold that triggers the 4.5 percent rate. Indonesia, the biggest grower, fixed the duty at 9 percent this month. “The zero export tax is still giving a boost to the market,� Chandran Sinnasamy, head of trading at LT International Futures Sdn., said from Kuala Lumpur before the January data from the board was released during the midday break. “February exports look like they may be better.� In the first 10 days of this month, exports jumped 18 percent to 440,830 tons from 373,462 tons in the same period of January, Intertek said Feb. 9. Shipments in January were 1.46 million tons, 7 percent less than in December. India’s imports of crude and refined palm oils jumped 76 percent to 900,000 tons in January, according to a Bloomberg survey published last week. The Solvent Extractors’ Association of India will publish data tomorrow. To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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