13/07/2016 (The Star) - Higher crude palm oil (CPO) stockpiles in June due to weak demand has already been reflected in the recent price decline as the commodity slumped to a ten-month low, said Maybank IB Research.

In a note today, the research house said that the current stockpile of 1.78 million tonnes (mt) has been priced in while CPO prices will likely trade between RM2,200 and RM2,500mt in the second half of this year.

“The price range will likely stimulate demand even as the El Nino impact on fresh fruit bunch (FFB) yields lingers. We stay cautious on the sector and will revisit it only in the final quarter of the year,” it said.

Maybank IB has reiterated its 'neutral' call on the plantations sector.

The higher-than-expected stockpile was mainly attributed to weaker demand as exports fell 12% on a month-on-month (m-o-m) basis to 1.13mt. On the other hand, production climbed 12% m-o-m to 1.53mt. Additionally, yields on CPO in June remained weak due to the lag effect of the drought last year, it said.

“Going forward, a sustained export growth for the month of July will be supportive and positive for CPO prices which has suffered downward pressure of late on concerns over relatively weak demand despite low output,” it said.

The benchmark three months forward CPO derivatives contract for October delivery closed at RM2,174mt on Tuesday, or the lowest since the middle of last year.

As at 11:20 this morning, the contract rose by RM51 and was last traded at RM2,225m