Palm oil stockpiles in March signal uptrend
14/04/2025 (The Star Online), Petaling Jaya - The Malaysian Palm Oil Board or MPOB registered an increase in production for March, reaching 1.38 million tonnes, marking the start of this year’s seasonal uptrend with the fresh fruit bunch harvest rising month-on-month from March until September or October.
Kenanga Research said the crude palm oil (CPO) price held well in March at RM4,740 per tonne. However, as prices usually start bottoming out in February and as the Brazil soybean harvest starts now, edible oil prices should ease a little seasonally in the second quarter.
“This seasonal downtrend has been expected. Recent softness in hydrocarbon oil prices is another dampener for bio-diesel demand, but the impact on CPO prices remains limited.
“We maintain an average CPO price of RM4,200 per tonne for 2025 and RM4,000 in 2026. All in all, edible oil prices should stay firm but palm oil premium to soybean should narrow; hence, our slightly lower forecast 2026 CPO price,” it said.
Kenanga Research said some margin tightness is to be expected, but conditions will remain robust on the back of the higher minimum wage in Malaysia and softer CPO prices.
The research house has maintained its “overweight” call on planters on the back of firm CPO prices, healthy upstream margins and an undemanding 1.1 times price-to-book-ratio and 15 times prospective price-to-earnings ratio.
“Our preference is for pure upstream planters with less volatility and more attractive valuations such as Hap Seng Plantations Holdings Bhd which also offers good yields, and Genting Plantations Bhd with limited downstream but firmer property contribution ahead,” it noted.
However, other research houses are maintaining a “neutral” call on the sector.
TA Research said it forecast an unchanged CPO price of RM3,800, but sees some downside risk to demand and weaker sentiment going forward.
“CPO futures have slumped to their lowest level in six months since October 2024, pressured by weaker Chicago soybean oil and crude oil prices following tariff announcements,” it said.
TA Research added that exports in March remained flattish at 1.01 million tonnes due to weaker demand from major importing markets. In line with that, the research house said it will downgrade companies under its coverage like FGV Holdings Bhd to “sell” from “hold”, but will upgrade TSH Resources Bhd to “hold” from “sell”.
Similarly, Maybank Investment Bank Bhd said after months of trading at a premium, CPO prices are now trading at a discount.
“We believe this is due to several factors including that CPO supply is anticipated to rise seasonally in the coming months and necessitate CPO price to be price competitive vis-à-vis other major vegetable oils, and the palm oil versus low sulfur gasoil spread we monitor in Europe is still wide as CPO price trades at a US$584 premium,” it said.
It also said despite being high in percentage terms, export figures were actually weak in absolute terms as the calendarised April figure is still relatively low at about one million.
“We keep our ‘neutral’ stance on the sector as the current CPO spot price of RM4,500 is likely to ease gradually as supply increases seasonally till late third quarter. We maintain our RM4,000 CPO average selling price forecast for 2025,” it said.
It added its preferred buys include SD Guthrie Bhd and Sarawak Oil Palms Bhd.