MARKET DEVELOPMENT
Higher Palm Oil Output Seen on Improving Fresh Fruit Bunches Yields
Higher Palm Oil Output Seen on Improving Fresh Fruit Bunches Yields
05/08/2015 (The Star) - Crude palm oil (CPO) production in July is anticipated to be higher, both on a monthly and yearly basis, mainly due to improving fresh fruit bunches (FFB) yields.
“A survey of 20 Malaysian planters by the CIMB Futures team suggests that CPO production in July was 2.6% higher month-on-month and 7% year-on-year at 1.81 million tonnes,” said CIMB Research in a report yesterday.
The research house said the rise in output, compared with a year ago, was due to improving FFB yields as estates recovered from biological tree stress, flooding in late-2014 and drought in early 2014.
“The survey indicates that Sarawak estates posted the strongest jump in output of around 10% month-on-month. Peninsular Malaysia posted a 4% month-on-month increase in output.
“Sabah estates were the weakest performer, registering a 7% decline in output, possibly due to the lower rainfall in the state.”
CIMB Research said Malaysia palm oil exports fell by 6% to 9% month-on-month based on cargo surveyors, Intertek and SGS estimates.
“This was due mainly to weaker demand from India and the European Union. We have assumed domestic consumption of 262,000 tonnes (the six-month average) and flattish month-on-month imports for July 2015.
“Based on these assumptions, we estimate that Malaysian palm oil inventories could rise by 4% month-on-month and 33% year-on-year to 2.4 million tonnes as at end-July 2015.”
The official figures would be released by the Malaysian Palm Oil Board next Monday, it said.
CIMB Research added that the higher month-on-month palm oil output in July was a surprise, as the research house had expected production to ease due to workers taking time off to celebrate the Ramadan festival.
“In the past, productivity in the estates typically drops slightly during this period but resume its uptrend after the festive period.
“The exports were weaker than expected, falling by 6% to 9% month-on-month, which we believe could be the absence of festival demand and buyers deferring purchases due to concerns over rising stocks as palm oil trees enter their peak production season.”
CIMB Research noted that palm oil stocks in Malaysia could rise by 4% month-on-month as at end-July, which is bearish for CPO prices.
“A survey of 20 Malaysian planters by the CIMB Futures team suggests that CPO production in July was 2.6% higher month-on-month and 7% year-on-year at 1.81 million tonnes,” said CIMB Research in a report yesterday.
The research house said the rise in output, compared with a year ago, was due to improving FFB yields as estates recovered from biological tree stress, flooding in late-2014 and drought in early 2014.
“The survey indicates that Sarawak estates posted the strongest jump in output of around 10% month-on-month. Peninsular Malaysia posted a 4% month-on-month increase in output.
“Sabah estates were the weakest performer, registering a 7% decline in output, possibly due to the lower rainfall in the state.”
CIMB Research said Malaysia palm oil exports fell by 6% to 9% month-on-month based on cargo surveyors, Intertek and SGS estimates.
“This was due mainly to weaker demand from India and the European Union. We have assumed domestic consumption of 262,000 tonnes (the six-month average) and flattish month-on-month imports for July 2015.
“Based on these assumptions, we estimate that Malaysian palm oil inventories could rise by 4% month-on-month and 33% year-on-year to 2.4 million tonnes as at end-July 2015.”
The official figures would be released by the Malaysian Palm Oil Board next Monday, it said.
CIMB Research added that the higher month-on-month palm oil output in July was a surprise, as the research house had expected production to ease due to workers taking time off to celebrate the Ramadan festival.
“In the past, productivity in the estates typically drops slightly during this period but resume its uptrend after the festive period.
“The exports were weaker than expected, falling by 6% to 9% month-on-month, which we believe could be the absence of festival demand and buyers deferring purchases due to concerns over rising stocks as palm oil trees enter their peak production season.”
CIMB Research noted that palm oil stocks in Malaysia could rise by 4% month-on-month as at end-July, which is bearish for CPO prices.