Nov. 3 (Bloomberg) -- Palm oil declined as mounting stockpiles in Indonesia, the world’s biggest producer, boosted investor concern about excess supply. “Increasing palm oil stocks over in Indonesia are starting to get on people’s radar screen,” Carey Wong, an analyst at Oversea-Chinese Banking Corp., said today by phone from Singapore. “The problem is, demand hasn’t really picked up faster than the increase in production.” Inventories in the country probably climbed to 1.7 million tons in October from an average of 1.3 million to 1.4 million tons in August and September, Derom Bangun, a deputy chairman of Indonesia’s Palm Oil Board, said yesterday in Kuala Lumpur. Palm oil for January delivery dropped 0.8 percent to 2,190 ringgit ($637) a ton on the Malaysia Derivatives Exchange. Crude oil for December delivery in New York dropped 1.1 percent to $77.34 a barrel at 6:59 p.m. Singapore time, and soybean oil for December delivery in Chicago declined 0.43 percent to 36.63 cents a pound at 6:53 p.m. Singapore time. Soybean oil’s premium over palm oil was 27 percent today, down from a three-month high of 32 percent on Oct. 21. Rising inventories may curb a 29 percent rally in palm oil futures this year, which outpaced a 9.1 percent gain in soybean oil. Crude oil has advanced 73 percent this year. Palm oil production in Indonesia may reach 21.5 million tons to 22 million tons in 2010 as more plantations mature, from an expected 20.5 million tons this year, Bangun said. Exports will also be higher as economic growth boosts demand in China and India, he said. Rule Delayed Indonesia postponed to July 2010 a requirement for commodity exporters to use letters of credit for shipments exceeding $1 million. The condition, scheduled to take effect Nov. 1, was postponed “because the aim of the rule should be reached without causing excessive burden to exporters amid a global recession that has not recovered,” a statement from Indonesia’s Department of Trade said today. PT Sinar Mas Agro Resources and Technology may build two palm oil processing plants for a total of $150 million, Bisnis Indonesia reported. Sinar Mas plans to build a palm oil-based food-processing plant in Jakarta and an oleochemical plant in Medan, North Sumatra, it reported. At the state-owned Joint Marketing Office, palm oil for delivery from Belawan port in North Sumatra province was traded at 6,458 rupiah per kilogram ($670 a ton), up from 6,433 rupiah yesterday. Demand is weak as buyers have enough stockpiles, said a trader based in Medan, North Sumatra. Palm oil traded at 6,450 rupiah a kilogram from Belawan port, she said. -- With assistance from Soraya Permatasari in Kuala Lumpur Editors: James Poole, Indranil Ghosh To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net; Yoga Rusmana in Jakarta at 3021 or yrusmana@bloomberg.net

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