MARKET DEVELOPMENT
May Palm Oil Inventory Dips as Exports Soar
May Palm Oil Inventory Dips as Exports Soar
14/06/2017 (The Edge Markets MY) - The stronger seasonal demand for the preparation of the Ramadan festival has pushed the country’s palm oil stockpile to 1.56 million tonnes — the lowest level for May in the past eight years.
The inventory level at 1.56 million is also the lowest in two months.
“What we are seeing is a seasonal demand for domestic and international consumption, especially now that the festive season to mark the end of Ramadan (fasting month) is fast approaching towards the end of this month,” CIMB Investment Bank Bhd regional head of plantations and head of Malaysia equity research Ivy Ng Lee Fang told The Edge Financial Daily over the telephone.
Malaysian Palm Oil Board (MPOB) announced that the country’s palm oil inventory fell 2.6% to 1.56 million tonnes recorded at end-May from 1.6 million tonnes a month ago, the lowest since March this year, and the lowest recorded since 2010 for the month of May.
“The palm oil stock also declined year-on-year for the first time, which we deem it to be replenishment for domestic consumption,” she added.
Despite the dip in monthly palm oil inventory, MPOB said Malaysia continued to record stronger production and exports of the crude palm oil (CPO) in May.
On CPO production, MPOB data showed that it grew 6.88% to 1.65 million tonnes in May from 1.55 million tonnes in April, the highest production so far this year, which Ng deemed it as partial recovery from the El Nino weather effect.
Cumulatively, MPOB said CPO production totalled 7.4 million tonnes from January to May this year, which made up 42.7% of last year’s production.
On a yearly basis, it is worth noting that the country’s CPO production has been on a downward trend since the last two years, declining to 17.32 million tonnes in 2016 from 19.96 million tonnes in 2015.
As for exports of the CPO, MPOB said they grew 17.33% to 1.51 million tonnes in May from 1.28 million tonnes a month earlier.
“The higher exports in May were due to stronger demand from India and Pakistan as the consuming countries stocked up ahead of Ramadan festival,” Ng added.
MPOB said Malaysia’s total palm oil exports to India went up 70.13% to 273,699 tonnes in May from 160,878 tonnes in April, while exports to Pakistan soared 97.48% to 108,185 tonnes in May from the preceding month.
Between January and May this year, MPOB noted that Malaysia exported 6.45 million tonnes of the CPO, which made up 40.19% of last year’s CPO exports of 16.05 million tonnes.
Going forward, Ng said plantation companies remain cautious about production prospects for June and are guiding for flat to contraction.
“This could partly be due to the fact that there are 30 days in June compared with 31 days in May and productivity may drop as workers take time out to celebrate the Hari Raya Aidilfitri festival from June 25 to June 26,” added Ng, who is maintaining a “neutral” stance on the agribusiness sector.
As for CPO price outlook, Ng expects it to be supported in the near term, in view of the tight supplies in the near term from Malaysia and Indonesia.
“The projection for lower stockpile for end-May is supportive for near-term CPO prices and we predict stock could be tighter in June,” Ng said, forecasting the CPO to average at RM2,600 per tonne this year.
The inventory level at 1.56 million is also the lowest in two months.
“What we are seeing is a seasonal demand for domestic and international consumption, especially now that the festive season to mark the end of Ramadan (fasting month) is fast approaching towards the end of this month,” CIMB Investment Bank Bhd regional head of plantations and head of Malaysia equity research Ivy Ng Lee Fang told The Edge Financial Daily over the telephone.
Malaysian Palm Oil Board (MPOB) announced that the country’s palm oil inventory fell 2.6% to 1.56 million tonnes recorded at end-May from 1.6 million tonnes a month ago, the lowest since March this year, and the lowest recorded since 2010 for the month of May.
“The palm oil stock also declined year-on-year for the first time, which we deem it to be replenishment for domestic consumption,” she added.
Despite the dip in monthly palm oil inventory, MPOB said Malaysia continued to record stronger production and exports of the crude palm oil (CPO) in May.
On CPO production, MPOB data showed that it grew 6.88% to 1.65 million tonnes in May from 1.55 million tonnes in April, the highest production so far this year, which Ng deemed it as partial recovery from the El Nino weather effect.
Cumulatively, MPOB said CPO production totalled 7.4 million tonnes from January to May this year, which made up 42.7% of last year’s production.
On a yearly basis, it is worth noting that the country’s CPO production has been on a downward trend since the last two years, declining to 17.32 million tonnes in 2016 from 19.96 million tonnes in 2015.
As for exports of the CPO, MPOB said they grew 17.33% to 1.51 million tonnes in May from 1.28 million tonnes a month earlier.
“The higher exports in May were due to stronger demand from India and Pakistan as the consuming countries stocked up ahead of Ramadan festival,” Ng added.
MPOB said Malaysia’s total palm oil exports to India went up 70.13% to 273,699 tonnes in May from 160,878 tonnes in April, while exports to Pakistan soared 97.48% to 108,185 tonnes in May from the preceding month.
Between January and May this year, MPOB noted that Malaysia exported 6.45 million tonnes of the CPO, which made up 40.19% of last year’s CPO exports of 16.05 million tonnes.
Going forward, Ng said plantation companies remain cautious about production prospects for June and are guiding for flat to contraction.
“This could partly be due to the fact that there are 30 days in June compared with 31 days in May and productivity may drop as workers take time out to celebrate the Hari Raya Aidilfitri festival from June 25 to June 26,” added Ng, who is maintaining a “neutral” stance on the agribusiness sector.
As for CPO price outlook, Ng expects it to be supported in the near term, in view of the tight supplies in the near term from Malaysia and Indonesia.
“The projection for lower stockpile for end-May is supportive for near-term CPO prices and we predict stock could be tighter in June,” Ng said, forecasting the CPO to average at RM2,600 per tonne this year.