MARKET DEVELOPMENT
Softer CPO Price Outlook for The Plantation Sector
Softer CPO Price Outlook for The Plantation Sector
15/05/2017 (The Edge) - Downgrade to neutral. Palm inventories continue to rise for the second month with a gain of 3% month-on-month (m-o-m) at 1.59 million tonnes for the month of April. Nevertheless, the inventory level was below the consensus estimate of 1.63 million tonnes.
Meanwhile, we downgrade our plantation sector outlook from “overweight” to “neutral” as we see more pressure coming from the rising crude palm oil (CPO) production in the coming months as oil palm trees are going to enter the high production cycle next month.
We expect CPO prices to trade at an average of RM2,700/tonne in the first half of 2017 (1H17) and around RM2,200/tonne to RM2,300/tonne in 2H17.
We also lower our full-year CPO price outlook from RM2,600/tonne to RM2,500/tonne. For plantation stocks, we only like Genting Plantations Bhd and Sime Darby Bhd.
We have downgraded TSH Resources Bhd and Ta Ann Holdings Bhd to “neutral”.
Inventories rose for a second straight month. Despite seeing improved export demand, production growth outpaced export growth. Stock to usage ratio slipped from 8.8% to 8.6%.
Palm oil exports climbed for a second straight month, up 1.4%. Year to date (YTD), total palm oil exports gained 1.4%.
All major consuming countries, namely, China (+30.9%), European Union (+11.2%), Pakistan (+0.4%) and US (+19%) showed improved demand except India (-6.1%).
We believe that demand in the region such as India and the Middle East is picking up ahead of the upcoming Ramadan celebration.
Production reached the highest level in five months. CPO production continued with another gain of 5.7% to 1.54 million tonnes. Production in Peninsular Malaysia and East Malaysia grew 5.8% m-o-m and 5.6% m-o-m, respectively. YTD, total production jumped 18.2% year-on-year.
For the first 10 days of May 2017, Malaysia’s CPO exports jumped 12.9% m-o-m, according to Intertek.
The pace of production recovery is the main highlights for buyers as they tend to buy more when CPO prices become cheaper.
Based on The Malaysian Palm Oil Board reference price from April 10 to May 9, 2017 of RM2,700/tonne, the CPO export duty is likely to fall from 7% to 5.5%.
Average April CPO price stood at RM2,743/tonne, 7% down from March’s RM2,948/tonne.
Meanwhile, we downgrade our plantation sector outlook from “overweight” to “neutral” as we see more pressure coming from the rising crude palm oil (CPO) production in the coming months as oil palm trees are going to enter the high production cycle next month.
We expect CPO prices to trade at an average of RM2,700/tonne in the first half of 2017 (1H17) and around RM2,200/tonne to RM2,300/tonne in 2H17.
We also lower our full-year CPO price outlook from RM2,600/tonne to RM2,500/tonne. For plantation stocks, we only like Genting Plantations Bhd and Sime Darby Bhd.
We have downgraded TSH Resources Bhd and Ta Ann Holdings Bhd to “neutral”.
Inventories rose for a second straight month. Despite seeing improved export demand, production growth outpaced export growth. Stock to usage ratio slipped from 8.8% to 8.6%.
Palm oil exports climbed for a second straight month, up 1.4%. Year to date (YTD), total palm oil exports gained 1.4%.
All major consuming countries, namely, China (+30.9%), European Union (+11.2%), Pakistan (+0.4%) and US (+19%) showed improved demand except India (-6.1%).
We believe that demand in the region such as India and the Middle East is picking up ahead of the upcoming Ramadan celebration.
Production reached the highest level in five months. CPO production continued with another gain of 5.7% to 1.54 million tonnes. Production in Peninsular Malaysia and East Malaysia grew 5.8% m-o-m and 5.6% m-o-m, respectively. YTD, total production jumped 18.2% year-on-year.
For the first 10 days of May 2017, Malaysia’s CPO exports jumped 12.9% m-o-m, according to Intertek.
The pace of production recovery is the main highlights for buyers as they tend to buy more when CPO prices become cheaper.
Based on The Malaysian Palm Oil Board reference price from April 10 to May 9, 2017 of RM2,700/tonne, the CPO export duty is likely to fall from 7% to 5.5%.
Average April CPO price stood at RM2,743/tonne, 7% down from March’s RM2,948/tonne.