Borneo Post Online (14/04/2020) - KUCHING: Analysts are starting to see the effects of the Movement Control Order (MCO) on plantation’s supply and demand chain.

This comes as March 2020’s closing inventory declined 40.8 per cent year on year (y-o-y) primarily due to lower opening stock (minus 44.4 per cent y-o-y) and lower output levels (minus 16.4 per cent y-o-y).

Palm oil export for March 2020 also fell by 27 per cent y-o-y to 1.2 million metric tonnes (MT), mainly caused by lower export demand from India (drop of 92.9 per cent), China (a 15.7 per cent drop) and the European Union (drop of 11.3 per cent y-o-y) in view of Covid-19.

April will not see planters faring any better, warned researchers at Kenanga Investment Bank Bhd (Kenanga Research), as they expect exports to decline further to 1.07 million MT.

“Exports to India, China, and EU are expected to remain subdued given the on-going Covid-19 threat and India’s recent lockdown,” it said yesterday. “Accordingly, we are forecasting exports to decline further by 9.3 per cent month on month (m-o-m) to 1.07 million MT in April.

“Data from cargo surveyors for April 1 to 10 have shown an average decline in exports of 9.6 per cent m-o-m, corroborating our view. Nonetheless, backloaded demand from India could be on the cards, considering its depleting oils and fats inventory during the lockdown,” it added.

Separately, the team at MIDF Amanah Investment Bank Bhd (MIDF Research) expect April’s CPO production to also be affected by the ongoing MCO.

This is mainly due to the postponement of the collection of fresh fruit bunches (FFB) which would indirectly affect the quality of the oil being produced as well.

“In addition, the extended closure of Sabah’s plantation operations in six districts from March 25, 2020 until April 14, 2020 will further aggravate the supply issue,” it said in a separate report.

“We gather that, in aggregate, the six districts which consist of Kalabakan, Semporna, Kunak, Tawau, Lahad Datu and Kinabatangan, represent about 65 per cent of Sabah’s total planted hectares of 1.2 million and 75 per cent of production in Sabah.”

To recall, Sabah accounted for about 25 per cent of Malaysia’s total CPO output in 2019.

“Thus, we opine that the plantation companies whose planted areas are concentrated in the restricted area will be facing a greater supply disruption and translates into lesser CPO sales,” MIDF Research said.

“While the resumption of the plantation operations in Sabah is allowed after April 4, 2020 by the state government, we do not discount the possibility of further closure should Covid-19 situation exacerbate.”

Read more at https://www.theborneopost.com/2020/04/14/order-effects-start-to-show-as-cpo-production-drops-in-march/