Kuala Lumpur, March 12 - The fundamentals for vegetable oils continue to remain tight despite higher Malaysian palm oil production and inventories at an all-time high there, Citigroup said in its latest client note.
"There is no change in our fundamental view. Supply of oilseeds is not expected to increase sufficiently," said the client note, issued earlier this week.
The balance in global demand and supply of oilseeds will remain tight in 2008-09, it said.
The stocks-to-usage ratio of seven major oilseeds is expected to be around 15% over the next two years even after factoring in an improving soybean production outlook in South America, it added.
Malaysia produced 26% more palm oil on year during January-February 2008 to 2.65 million tonsa and its end-month stocks are estimated at an all-time high of 1.93 million metric tons as of Feb. 29, according to the Malaysian Palm Oil Board's latest estimates.
Exports also rose 18.6% on year during January-February 2008 to 2.1 million tons.
Inventories are expected to gradually come off the current high in the coming months, said Citigroup.
Currently, according to industry sources, Indonesian planters are drawing down on their inventory levels before an expected increase in export tariffs on palm oil, it said.