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Malaysia's Jan palm oil stocks ease from highest on record

* Stockpiles ease from two-decade high

* Production declines slower than forecast

* Export strength not sustainable -trader

(Updates with details, background, quotes)

By Emily Chow

KUALA LUMPUR, Feb 11 (Reuters) - Malaysia's palm oil

inventories in January eased back from a near two-decade high at

end-December as demand increased amid falling production,

official data showed on Monday, although the stocks still

hovered just above 3 million tonnes.

January stocks in Malaysia (MYPOMS-TPO), the world's

second-largest palm oil producer and exporter, declined for the

first time in eight months, falling 6.7 percent to 3.001 million

tonnes, data from the Malaysian Palm Oil Board (MPOB) showed.

December's mark at 3.22 million tonnes was the highest ever

in data going back 20 years.

Declines in the stockpiles could help boost benchmark palm

oil prices, which have already edged up in January and

February from three-year lows touched at end-2018.

Palm oil was down 0.7 percent at 2,274 ringgit ($558.70) a

tonne at the midday break on Monday.

The inventory decline was attributed to a

sharper-than-expected jump in exports, said traders.

The MPOB data showed exports (MYPOME-PO) jumping to 1.68

million tonnes in January, up 21.2 percent from December. The

levels are their strongest since August 2016.

"Major destination markets picked up the pace in demand. For

example, China demand rose ahead of the Lunar New Year. Demand

also rose on cheaper prices," said a Kuala Lumpur-based trader.

He said the strong demand trend is unlikely to continue in

February given the ringgit's strength.

The ringgit, palm's currency of trade, has gained 0.6

percent against the dollar since the start of the month, making

palm oil more expensive for holders of foreign currencies.

Palm output in January (MYPOMP-CPOTT), meanwhile, eased 3.9

percent to 1.74 million tonnes from the previous month, falling

a third straight month to its lowest since August, although

dropping at a slower pace than forecast.

Production of palm oil, used in a variety of consumer goods

items from cooking oil to soap and lipstick, typically declines

in the first quarter of the year.

"Production is not falling as per the expected pace," said

Anilkumar Bagani, research head for commodities at Mumbai-based

broker Sunvin Group.

"Producers were delaying production for the last two months

when prices were on the decline, but then started to produce

more as prices recovered," he said.

A Reuters survey had forecast palm oil's end-January

stockpiles to fall 4.7 percent to 3.07 million tonnes, while

production was forecast to fall 10.9 percent to 1.61 million

tonnes. Exports were forecast to gain 12.4 percent to 1.56

million tonnes.

The following is a breakdown of the Malaysian Palm Oil Board

figures and Reuters estimates for January:

(volumes in tonnes)

Jan 2019 Jan 2019 poll Jan 2018 Dec 2018

Output 1,737,498 1,610,500 1,586,653 1,808,038

Stocks 3,001,169 3,065,037 2,548,704 3,216,476*

Exports 1,676,442 1,555,000 1,472,666 1,383,307

Imports 81,084 75,000 34,825 108,621

*denotes revised figures

($1 = 4.0700 ringgit)

(Reporting by Emily Chow; editing by Christian Schmollinger)