“The rise in stocks in Malaysia, the world’s second-largest palm oil producer after Indonesia, would put pressure on benchmark futures, which fell more than 4% in two days.

“Malaysia’s palm oil stocks at the end of June rose 4.35% from May to 1.83 million metric tonnes, the highest since February,” said the Malaysian Palm Oil Board (MPOB).

Crude palm oil production declined 5.23% from May to 1.62 million tonnes, while palm oil exports plunged 12.82% to 1.21 million tonnes.

Meanwhile, a Reuters survey forecasted inventories at 1.83 million tonnes, with output at 1.62 million tonnes and exports at 1.24 million tonnes.

“Stocks rose as expected, but the buildup is concerning.

“Palm oil inventories are increasing even before the peak production season begins in August,” said a New Delhi-based dealer with a global trade house.

The dealer said the discount of palm oil to soy oil and sunflower oil is small and needs to widen to stimulate demand.

“Otherwise, traditional buyers may shift to competing oils,” said the dealer.