Declining palm oil stock boosts prices
14.06.2019 (The Star Online) - KUALA LUMPUR: The declining palm oil stock at 2.45 million tonnes for end-May is supportive of the near-term crude palm oil (CPO) prices, says CGSCIMB in its latest agribusiness report.
It expects CPO prices to trade between RM2,000 and RM2,300 per tonne range this month.
The research unit, which has a “neutral” call on the plantation sector, continued to maintain its average CPO price forecast at RM2,400 per tonne for 2019.
Yesterday, the third-month benchmark CPO futures contract for September closed RM37 higher at RM2,015 per tonne.
CGSCIMB said: “We project palm oil stock to fall 5% month-on-month (m-o-m) to 2.31 million tonnes as at end-June 2019 as exports and consumption are projected to trump production and imports.
“Historically, local palm oil stock typically bottoms in June which is about 30% over the past 10 years.”
The current palm oil stock of 2.45 million tonnes remains high compared with the five-year historical average of 2.07 million tonnes, added CGSCIMB.
However, it pointed out that palm oil stock could bottom soon as “production picks up in the second half of 2019”.
The second half-year palm oil production makes up about 55% of total output in the past 10 years.
CPO output grew 1% m-o-m to 1.67 million tonnes in May due to more working days than April.
However, the output figure was 3% higher compared with CGSCIMB survey findings of 1.621 million tonnes as the east Malaysian estates production was better than expected.
“The slight concern is that palm oil output growth from local estates remained robust, tracking ahead of our forecast of 4% output growth for 2019,” it added.
Meanwhile, palm oil exports stayed strong, rising by 4% m-o-m and 33% year-on-year to 1.71 million tonnes in May as traders stocked up ahead of the Raya festival.
The higher m-o-m exports were due to stronger demand from EU (+43% m-o-m) and US (+331% m-o-m), which more than offset weaker exports to Pakistan (-10% m-o-m) and China (-34% m-o-m).