New Straits Times (11/07/2018) - KUALA LUMPUR: Palm oil inventory stock should rise five per cent to 2.30 million tonnes with an anticipation of a supply growth of 1.69 million tonnes this month.

Kenanga Research said production should also rebound 23 per cent to 1.64 million tonnes, followed by the recovery in export volume of 18 per cent to 1.33 million tonnes in July.

As of end-June, Malaysia palm oil inventory was 2.19 million tonnes with 13 per cent declined in mom in export volume, attributed by weak export to China.

“We expect the trend reversal on palm oil stocks to contribute to softer crude palm oil (CPO) prices in the second-half (2H) 2018. With risks (soft soybean price, higher palm production, higher Indonesian supply) outweighing opportunities (supportive crude oil price, better Indian and biodiesel demand),” it said in a research report.

The research house expects a weaker CPO prices at RM2,250 per tonne in the third quarter.

“We expect July production to rebound by double digits in all key producing areas. While the quantum appears high, we note that our forecast remains below the five-year average of July production at 1.71 million tonnes,” it added.

Kenanga Research also expects better demand from India (equalising edible oil tariffs and upcoming festivals), the European Union (biodiesel demand) and other non-key markets to drive exports higher in July.

The firm kept a “neutral” call on plantations despite the lacklustre immediate outlook as it thinks production improvements and limited downside risk could support planters’ margins in the second half.

It said the CPO forecast is unchanged at RM2,400 per tonne with the short-term third quarter 2018 trade ranging between RM2,200 and RM2,400.

Kenanga Research said stable CPO prices should benefit integrated planters due to lower input costs.

Meanwhile, MIDF Research expected July inventory to increase two per cent to 2.24 million tonnes, while export to increase five per cent month-on-month (m-o-m) to 1.19 million tonnes.

“We expect demand to improve in the Northern Hemisphere as palm oil usage tends to increase during summer season. For production, we expect an increase of eight per cent m-o-m to 1.44 million tonnes due to seasonal factor.”

The research firm has maintained  the average CPO price forecast of RM2,400 per tonne for 2018.

“We believe the concern over trade war with US has caused the consumers in China to take a cautious stance and hence they have minimise their purchase in the near term.”

MIDF Research said among major export destinations including to China had slipped 19 per cent mom to 155,586 tonnes and Pakistan dropped 23 per cent m-o-m to 98,690 tonnes, while export to India improved 112 per cent m-o-m to 159,724 tonnes.

Production also declined 13 per cent m-o-m in June and 12 per cent year-on-year to 1.33 million tonnes in June, could be caused by fasting month and Hari Raya effect.

“Going forward, we expect July production to increase eight per cent mom to 1.44 million tonnes. We believe the downside is limited as we expect strong Brent crude oil price to lend support for movement of CPO price.”

Read more at https://www.nst.com.my/business/2018/07/389595/palm-oil-inventory-expects-rise-five-pct-230m-tonnes-july