MARKET DEVELOPMENT
Palm Oil Inventory up on Higher Production and Lower Exports
Palm Oil Inventory up on Higher Production and Lower Exports
12/08/2015 (The Star) - Palm oil inventory resumed its on uptrend, increasing by 5.3% month-on-month to 2.27 million tonnes in July, mainly on higher production and lower exports.
Production rose by 2.9% month-on-month and exports dropped 5.6%.
In a note on Tuesday, Hong Leong IB Research said it maintained its neutral stance on the sector and the average crude palm oil (CPO) price assumption of RM2,400 per tonne for 2016.
It said the long-term sector outlook remained favourable; however, it foresaw weak demand and price outlook.
Production reversed to a month-on-month growth of 2.9% in July from a decline of 2.6% month-on-month in the previous month.
While most states recorded positive month-on-month production growth, Kedah and Sabah still posted negative production growth of 2.2% and 2.7% respectively.
Exports fell by 5.6% month-on-month to 1.6 million tonnes for the first time since April, mainly on the back of a 19.3% decline in exports to India (-19.3%) and Pakistan (-43.7%).
The research house said this had more than offset higher exports to China and Netherlands, which increased by 14.7% and 49.1% respectively.
“Although palm’s discount against the soybean oil has recently widened, we believe stockpile will remain high in the coming months, on the back of rising palm production.
“CPO price averaged at RM2,215 per tonne in the first half, and we are maintaining our average projected CPO price of RM2,300 per tonne for 2015, as we are of the view that El Nino and palm’s widened price discount against the soybean oil, will support higher palm oil prices in the 2H,” it said.
Hong Leong said the implementation of the higher biodiesel mandate in Indonesia and Malaysia would act as a catalyst for the industry.
“Weather uncertainties revisit, which will result in supply distortion, hence boosting prices of edible oil,” it added.
Production rose by 2.9% month-on-month and exports dropped 5.6%.
In a note on Tuesday, Hong Leong IB Research said it maintained its neutral stance on the sector and the average crude palm oil (CPO) price assumption of RM2,400 per tonne for 2016.
It said the long-term sector outlook remained favourable; however, it foresaw weak demand and price outlook.
Production reversed to a month-on-month growth of 2.9% in July from a decline of 2.6% month-on-month in the previous month.
While most states recorded positive month-on-month production growth, Kedah and Sabah still posted negative production growth of 2.2% and 2.7% respectively.
Exports fell by 5.6% month-on-month to 1.6 million tonnes for the first time since April, mainly on the back of a 19.3% decline in exports to India (-19.3%) and Pakistan (-43.7%).
The research house said this had more than offset higher exports to China and Netherlands, which increased by 14.7% and 49.1% respectively.
“Although palm’s discount against the soybean oil has recently widened, we believe stockpile will remain high in the coming months, on the back of rising palm production.
“CPO price averaged at RM2,215 per tonne in the first half, and we are maintaining our average projected CPO price of RM2,300 per tonne for 2015, as we are of the view that El Nino and palm’s widened price discount against the soybean oil, will support higher palm oil prices in the 2H,” it said.
Hong Leong said the implementation of the higher biodiesel mandate in Indonesia and Malaysia would act as a catalyst for the industry.
“Weather uncertainties revisit, which will result in supply distortion, hence boosting prices of edible oil,” it added.