MARKET DEVELOPMENT
Palm Oil Inventories Likely Down 3% Month-on-month at End of June
Palm Oil Inventories Likely Down 3% Month-on-month at End of June
03/07/2015 (The Star) - CIMB Research is estimating that palm oil inventories that is set to be announced on July 10 could post a 3% month-on-month (m-o-m) decline to 2.17 million tonnes at end-June.
CIMB Research’s assumptions are based on 6-month average domestic consumption of 252,000 tonnes and flattish m-o-m imports for June 2015.
The CIMB Research futures team had also conducted an industry survey of 18 planters in Malaysia to collect statistics that indicated that crude palm oil (CPO) production in June 15 was flattish m-o-m but 15% higher year-on-year (y-o-y) at 1.81m tonnes.
The survey also indicated that Sarawak estates posted the strongest jump in output of around 10% m-o-m while Peninsular Malaysia posted a 1.3% m-o-m decline in output.
It noted that Sabah’s estates were the weakest performer, registering a 5 to 14% decline in output, possibly due to the lower rainfall in the state
“The main takeaway from our survey is that Malaysian palm oil output took a breather in June.
“This is likely to be extended to July due partly to the Ramadan fasting month from mid-June to mid-July,” the house said.
The research house added that in the past, productivity in the estates typically dropped slightly during this period but resumed its uptrend after the festive period.
“We are positive on the strong export growth of 6-9% m-o-m, which we believe could be due to pre-Ramadan demand as well as restocking activities by some customers on the back of El Nino concerns,” it said.
CIMB Research noted that the lower stockpile would provide some short-term relief to the market and help to offset concern over slower Indonesia biodiesel progress and a higher production season for palm oil in the third quarter.
Keeping its “neutral” rating on the sector, CIMB Research said that it expected CPO prices to be range-bound at RM2,000-2,500 per tonne in the near-term.
CIMB Research’s assumptions are based on 6-month average domestic consumption of 252,000 tonnes and flattish m-o-m imports for June 2015.
The CIMB Research futures team had also conducted an industry survey of 18 planters in Malaysia to collect statistics that indicated that crude palm oil (CPO) production in June 15 was flattish m-o-m but 15% higher year-on-year (y-o-y) at 1.81m tonnes.
The survey also indicated that Sarawak estates posted the strongest jump in output of around 10% m-o-m while Peninsular Malaysia posted a 1.3% m-o-m decline in output.
It noted that Sabah’s estates were the weakest performer, registering a 5 to 14% decline in output, possibly due to the lower rainfall in the state
“The main takeaway from our survey is that Malaysian palm oil output took a breather in June.
“This is likely to be extended to July due partly to the Ramadan fasting month from mid-June to mid-July,” the house said.
The research house added that in the past, productivity in the estates typically dropped slightly during this period but resumed its uptrend after the festive period.
“We are positive on the strong export growth of 6-9% m-o-m, which we believe could be due to pre-Ramadan demand as well as restocking activities by some customers on the back of El Nino concerns,” it said.
CIMB Research noted that the lower stockpile would provide some short-term relief to the market and help to offset concern over slower Indonesia biodiesel progress and a higher production season for palm oil in the third quarter.
Keeping its “neutral” rating on the sector, CIMB Research said that it expected CPO prices to be range-bound at RM2,000-2,500 per tonne in the near-term.