16/11/2012 (Borneo Post) - Crude palm oil (CPO) exports have shown positive developments with a real pickup in the month of October after hitting the lowest turning point in July this year.

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), export figures for October were the highest this year at 1.76 million metric tonnes (mmt), an increase of 16.2 per cent month-on-month (m-o-m) and also the highest since October 2011.

Apart from that, domestic CPO consumption had also increased significantly by 32.2 per cent m-o-m.

However, the research house opined that the higher exports and consumption had pulled the stock-to-usage (SUR) lower to 10.63 per cent. This it noted should allay concerns over rising inventory, which increased by 1.11 per cent m-o-m to 2.51mmt.

“CPO price is expected to remain depressed for the remainder of the year on account of adverse sentiment towards inventory. We believe inventory will remain above two mmt level up to early 2013, but are cognisant of the falling SUR,” the research house said.

It observed that due to lingering concerns over high level of inventory, it expected CPO prices to stabilise range bound between RM2,300 per metric tonne (pmt) and RM2,500 pmt for the remainder of the year.

The research house said according to the Department of Agriculture (USDA), the demand for soybean had imparted a downward pressure on CPO prices. It pointed out that on November 13, soybean traded around US$1,031 pmt, which translated into a palm oil to soybean price discount of negative 30.6 per cent.

“Despite rising usage for CPO, it will take a few months for inventory to fall to a level that will be a catalyst to price. We are therefore revising our average CPO forecast for FY12 from RM3,000 pmt to RM2,800 pmt,” the research house stated.

Currently CPO price have averaged at RM2,905 pmt year-to-date, at a decrease of 12.5 per cent y-o-y.

Moving forward, MIDF Research cautioned that being influenced by the general trend in commodities, CPO price movement was also sensitive towards policies particularly regarding tax structure.

“Since Malaysia’s new tax structure will be effective on January 1, 2013, we believe it will help CPO prices to recover to the RM3,000pmt level. Therefore, we are maintaining our FY13 average CPO forecast of RM3,050pmt,” the analyst added.