MARKET DEVELOPMENT
CIMB Research Retains Neutral on Plantations Sector
CIMB Research Retains Neutral on Plantations Sector
04/09/2014 (The Star) - CIMB Equities Research is maintaining its Neutral sector rating for the oil palm plantations and preference for planters that offer strong output growth prospects.
It said on Thursday a survey of 20 Malaysian planters conducted by the CIMB futures team revealed that crude palm oil (CPO) production remains strong in August due to favourable weather, spillover of harvesting from July and more working days in August.
“Our survey revealed that CPO production in Aug could rise by 13.7% on-month and 9% on-year to 1.89 million tonnes. The feedback from planters indicated that the Sarawak estates posted the highest production growth on-month (+10% to +30%), followed by Peninsula Malaysia (+2.5% to +23.7%) and Sabah (0% to +20%).
“We gathered that palm oil exports from Malaysia declined by around 5% on-month in August, based on the cargo surveyor reports by SGS (-5%) and Intertek (-4.8%). We have assumed domestic usage of 245,000 tonnes and imports of 3,000 tonnes in August.
“Based on the above figures, we deduce that Malaysian palm oil inventory at end-Aug could rise 16% on-month to 1.96m tonnes (an eight-month high). MPOB is set to release the official figures on Sept 10.
CIMB Research said the key takeaway from its survey was the stronger palm oil production in August.
This, combined with the weak exports, could lead to the steepest monthly jump in Malaysian palm oil inventory for 2014.
“We believe that the rising palm oil stocks and concerns about higher oilseed supplies will be negative for CPO price in the near term.
“We project that Malaysian palm oil stocks will continue to climb and possibly peak in October/November, based on: 1) the historical seasonal trend, and 2) the expectation that production/yield from West Malaysia estates will decline in 4Q due to the dry weather in 1Q14.
“The rising palm oil stocks, price competitiveness of CPO compared to other edible and crude oils in the coming months, progress on El Nino development and biodiesel mandates will be the key factors that determine the level of palm oil stocks in the coming month.
It said on Thursday a survey of 20 Malaysian planters conducted by the CIMB futures team revealed that crude palm oil (CPO) production remains strong in August due to favourable weather, spillover of harvesting from July and more working days in August.
“Our survey revealed that CPO production in Aug could rise by 13.7% on-month and 9% on-year to 1.89 million tonnes. The feedback from planters indicated that the Sarawak estates posted the highest production growth on-month (+10% to +30%), followed by Peninsula Malaysia (+2.5% to +23.7%) and Sabah (0% to +20%).
“We gathered that palm oil exports from Malaysia declined by around 5% on-month in August, based on the cargo surveyor reports by SGS (-5%) and Intertek (-4.8%). We have assumed domestic usage of 245,000 tonnes and imports of 3,000 tonnes in August.
“Based on the above figures, we deduce that Malaysian palm oil inventory at end-Aug could rise 16% on-month to 1.96m tonnes (an eight-month high). MPOB is set to release the official figures on Sept 10.
CIMB Research said the key takeaway from its survey was the stronger palm oil production in August.
This, combined with the weak exports, could lead to the steepest monthly jump in Malaysian palm oil inventory for 2014.
“We believe that the rising palm oil stocks and concerns about higher oilseed supplies will be negative for CPO price in the near term.
“We project that Malaysian palm oil stocks will continue to climb and possibly peak in October/November, based on: 1) the historical seasonal trend, and 2) the expectation that production/yield from West Malaysia estates will decline in 4Q due to the dry weather in 1Q14.
“The rising palm oil stocks, price competitiveness of CPO compared to other edible and crude oils in the coming months, progress on El Nino development and biodiesel mandates will be the key factors that determine the level of palm oil stocks in the coming month.