MARKET DEVELOPMENT
MIDF maintains positive stance on palm oil sector
MIDF maintains positive stance on palm oil sector
13.06.2022 (www.theedgemarkets.com) - KUALA LUMPUR (June 13): MIDF Research has maintained its positive stance on the oil palm plantation sector, raising its calendar year 2022 (CY22) crude palm oil (CPO) target price by 27.9% to RM5,500 per tonne from RM4,300 per tonne previously.
The research house also expects the CPO price to retain its upward momentum throughout CY22, supported by higher prices of edible oils on the back of supply concerns amid the prolonged Russia-Ukraine war, Indonesia’s widened export ban, the subdued production outlook for soybean and the resilient demand outlook as economic activities improve.
“Despite our positive view on the sector, we do expect that the CPO price will ease in the second half of this year (2HCY22) but at a very slow pace.
“Given the higher-than-expected CPO price in 1HCY22 as well as previously mentioned factors, we anticipate that the CPO price will remain elevated throughout CY22, supported by tight inventory supply in our local plantation industry,” it said in a note on Monday (June 13).
However, the research house noted that key risks to the CPO price are new Covid-19 variants which could result in another worldwide lockdown, above-expectation stockpiles and supply of soybean and soybean oil, as well as changing policy in importing countries.
MIDF Research also highlighted that Malaysia’s palm oil production had dipped, with overall CPO production at 1.46 million tonnes versus 1.57 million tonnes in the previous year, mainly due to lower contributions from all states.
It said for the cumulative five-month period, the fresh fruit bunch yield dropped to 5.63 tonnes per hectare (t/ha), from 5.81 t/ha previously, mainly due to the bad weather impact, compounded by the acute labour shortage.
“We expect production to improve further following more boots on the ground in 2HCY22 to meet the labour shortage,” it noted.
As for exports, Malaysia’s palm oil export volume rose by 26.7% month-on-month (m-o-m) and 7.1% year-on-year to 1.36 million tonnes in May 2022 as importers turned to Malaysian palm oil following Indonesia’s palm oil export ban, it said.
“Even though Indonesia lifted its ban on May 19, 2022, we expect the ongoing Russia-Ukraine war and improving demand on better economic activities to support upside demand for palm oil,” it noted.
Meanwhile, Malaysia’s palm oil inventory level declined by 7.4% m-o-m to 1.52 million tonnes in May 2022 versus 1.64 million tonnes in April due to lower-than-expected production amid higher export demand during the month.
“However, we anticipate Malaysia’s palm oil stockpiles in the second to the third quarters to improve with the higher production cycle,” it added.