MARKET DEVELOPMENT
CPO Production Rises in June, Sarawak Sees Most Improvement in FFB Yield
CPO Production Rises in June, Sarawak Sees Most Improvement in FFB Yield
14/07/2016 (Borneo Post) - Statistics released by the Malaysian Palm Oil Board (MPOB) yesterday unveiled a rise in production of crude palm oil (CPO) as analysts saw marked improvements in fresh fruit bunch (FFB) yields across the country.
Notably, FFB yield overall improved by 14.8 per cent to 1.47 tonnes per hectarev in June due to continuing seasonal production up-cycle, noted the research team behind TA Securities Holdings Bhd (TA Research).
“Sarawak improved the most by 23.2 per cent to 1.38 tonnes per hectare, followed by Sabah with 17.9 per cent and Peninsula Malaysia with 8.7 per cent,” it compared in a sector outlook yesterday.
“Even though FFB yield production across Malaysia was lower by 9.3 per cent on a yearly comparison, we expect production in July to be higher with the ending of El Nino’s dry weather in May of 2016, which has caused draught and negatively affected the harvesting of palm oil plantations.”
MPOB’s June 2016 palm oil stockpile expanded for the first time since November 2015, beating market expectations. Stockpile increased 7.7 per cent month on month to 1.78 million as compared to 1.72 million tonnes estimate from Bloomberg’s survey.
“The higher-than-expected stockpile was mainly due to higher production of 1.53 million tonnes (an increase of 12.3 per cent m-o-m), which surpassed market estimates of 1.49 million tonnes, and lower exports (drop of 11.7 per cent m-o-m) of 1.13 million tonnes.
“The exports are below market estimates of 1.21 million tonnes by 5.5 per cent,” it said.
Kenanga Investment Bank Bhd (Kenanga Research) expects this seasonal production uptrend to continue into September or October this year – later than the previous two years’ peak production month of August, due to the lagged drought impactslowing fruit development.
“As for July 2016, in line with the eight-year historical average, we expect production to increase by seven per cent to 1.64 million metric tonnes,” it said in a separate note.
Meanwhile, TA Securities Holdings Bhd (TA Research) called for planters to look out for the La Nina to hit sometime in the latter half of the year.
“The National Oceanic and Atmospheric Administration (NOAA) and the US Climate Prediction Center is now predicting 75 per cent chance of La-Nina to develop during the fall and winter of 2016-17 given that El Nino has ended last May 2016.”
“La-Nina would generally cause significant rainfall to parts of Australia and Southeast Asia, more hurricanes in the Atlantic and a drier-than-normal condition in the US Southwest,” it said, adding that oil palm plantations harvest better in wet conditions.
“However, heavier rain that brings floods may disrupt harvesting and the excavation of FFB. This may drive up CPO prices in the second half of 2016. Note that the last La-Nina in 2007 and 2008 saw CPO prices surging to RM4,203 per tonne in March 2008.
“Besides, any disruption to soybean supply will also boost soybean price and cause positive spillover effect to CPO price.”
Notably, FFB yield overall improved by 14.8 per cent to 1.47 tonnes per hectarev in June due to continuing seasonal production up-cycle, noted the research team behind TA Securities Holdings Bhd (TA Research).
“Sarawak improved the most by 23.2 per cent to 1.38 tonnes per hectare, followed by Sabah with 17.9 per cent and Peninsula Malaysia with 8.7 per cent,” it compared in a sector outlook yesterday.
“Even though FFB yield production across Malaysia was lower by 9.3 per cent on a yearly comparison, we expect production in July to be higher with the ending of El Nino’s dry weather in May of 2016, which has caused draught and negatively affected the harvesting of palm oil plantations.”
MPOB’s June 2016 palm oil stockpile expanded for the first time since November 2015, beating market expectations. Stockpile increased 7.7 per cent month on month to 1.78 million as compared to 1.72 million tonnes estimate from Bloomberg’s survey.
“The higher-than-expected stockpile was mainly due to higher production of 1.53 million tonnes (an increase of 12.3 per cent m-o-m), which surpassed market estimates of 1.49 million tonnes, and lower exports (drop of 11.7 per cent m-o-m) of 1.13 million tonnes.
“The exports are below market estimates of 1.21 million tonnes by 5.5 per cent,” it said.
Kenanga Investment Bank Bhd (Kenanga Research) expects this seasonal production uptrend to continue into September or October this year – later than the previous two years’ peak production month of August, due to the lagged drought impactslowing fruit development.
“As for July 2016, in line with the eight-year historical average, we expect production to increase by seven per cent to 1.64 million metric tonnes,” it said in a separate note.
Meanwhile, TA Securities Holdings Bhd (TA Research) called for planters to look out for the La Nina to hit sometime in the latter half of the year.
“The National Oceanic and Atmospheric Administration (NOAA) and the US Climate Prediction Center is now predicting 75 per cent chance of La-Nina to develop during the fall and winter of 2016-17 given that El Nino has ended last May 2016.”
“La-Nina would generally cause significant rainfall to parts of Australia and Southeast Asia, more hurricanes in the Atlantic and a drier-than-normal condition in the US Southwest,” it said, adding that oil palm plantations harvest better in wet conditions.
“However, heavier rain that brings floods may disrupt harvesting and the excavation of FFB. This may drive up CPO prices in the second half of 2016. Note that the last La-Nina in 2007 and 2008 saw CPO prices surging to RM4,203 per tonne in March 2008.
“Besides, any disruption to soybean supply will also boost soybean price and cause positive spillover effect to CPO price.”