Wilmar had its lowest close in more than three months after the stock tumbled 2.4% to $3.31 on Monday. The stock’s underperformance relative to the broad index led to investors picking up over 12 million of Wilmar call warrants on Monday. Yesterday, the stock outperformed with a +1.2% gain to $3.35, while the various Wilmar call warrants bought rose between 4 to 12%.

The stock’s see-saw performance comes on the back of official palm oil data to be released today.

Malaysian palm oil stockpiles set to drop most in two years
In a Bloomberg survey on Monday, analysts and plantation companies estimate palm oil stockpiles in Malaysia (the second largest palm oil producer) in March to decline 7% from February, the steepest monthly drop since January 2011. If so, the decline in inventories for a third month may help stem the slump in palm oil prices in the past year, which is down 33% in the past year, to its lowest on April 1. At the same time, analysts have also estimated the Malaysian palm oil exports may gain for the first time since October and will be 7.5% higher than a year ago. Official numbers will be due for release today.

Indonesian palm oil exports also set for biggest drop in two years
In a separate Bloomberg survey released yesterday, March palm oil shipments from Indonesia (the largest palm oil produce) are also estimated to slump the most in two years. These falling shipments as a result of easing demand from China after the Lunar New Year, will negate the estimated decline in the Malaysian stockpiles mentioned above.

Forward projections on palm oil
Derom Bangun, chairman of the Indonesian Palm Oil Board said in a March 4 interview that he was bullish on palm and forecasted inventories in Indonesia to drop as an increase in demand outstrips record output of 30 million tons.

The forecasts for rising exports and declining reserves sparked a rally on the Malaysia Derivatives Exchange. Palm oil futures yesterday gained as much as 0.8% to 2,419 ringgit/ton intraday, the highest since March 28.

Historically, the stock prices of palm oil companies such as Wilmar tend to be positively correlated with the price movement in crude palm oil prices.

Source: Macquarie Research - 10 Apr 2013