MARKET DEVELOPMENT
29-12-2001
IVAN WONG COMMENTS ON MALAYSIAN PALM OIL
KUALA LUMPUR, Dec 21 (Reuters) - CPO production fell 6.7 percent or76,400 tonnes to 1.065 tonnes in November.The decline was 20,000 tonnes less than our estimates.Production dropped 11.2 percent or 78,600 tonnes to 625,200 tonnes inPeninsular Malaysia. East Malaysia in contrast registered a marginalincrease of 0.6 percent or 2,200 tonnes. This was contributed entirely bySabah, where production peaked at 373,800 tonnes or 10,000 tonnes morethan October.On an annual basis, production in the country contracted 8.6 percentor 100,000 tonnes. This was due solely to a 106,600 tonnes contraction inPeninsular Malaysia. For the 11 months ended November, production amountedto 10.855 million tonnes. This represents a growth of 9.7 percent over thecorresponding period of last year.We tentatively estimate output in December to record a month-on-monthdecline of around 180,000 tonnes or 17 percent. The margin of error forDecember could turn out to be larger than normal because of uncertaintieson the decline in the number of working hours arising from the Hari RayaAidil Fitri/Christmas holidays and monsoon rains in East Malaysia.PO offtake in November exceeded our estimate by 30,000 tonnes when itreached 1.13 million tonnes, or 85,000 tonnes more than October. This wasdue to stronger than expected PO exports of 982,941 tonnes, an increase of81,400 tonnes over October and 85,300 tonnes more than a year earlier.The November exports are the highest so far this year -- most likelyfor the whole of this year -- and exceeded the previous high of 978,143tonnes posted in March but fell somewhat short of the all-time-record of1.005 million tonnes registered in October last year.The MPOB reported exports to India and Pakistan rose 42,300 tonnes and15,900 tonnes to 182,800 tonnes and 119,100 tonnes respectively inNovember.The two other major buyers, the EU and China, reduced their offtake by8,600 tonnes and 25,900 tonnes to 143,200 tonnes and 136,600 tonnesrespectively.Surveyors figures also show a hefty shipment of 45,000 tonnes toNigeria. This raised Nigeria's offtake so far this year to around 75,000tonnes compared to 85,200 tonnes in 2000. Equally significant andnoteworthy, three times in the last 12 months when monthly exports surgedto or near a million tonnes, the following months will see a big drop of100,000-120,000 tonnes. It would not surprise us if exports this monthfollow the pattern. We tentatively estimate exports to drop some 115,000tonnes this month.PO stocks dropped moderately by 43,500 tonnes to 1.294 million tonnesat the end of November or 16,000 less than our estimate. CPO stocks fell28,900 tonnes to 748,900 tonnes while PPO stocks were down 14,600 tonnes.We maintain our estimate that PO stocks will be drawn down to around1.16 million tonnes at the end of December this year.A drop in PKO output of 10,400 tonnes helped to avert stocks of theoil reaching our estimate of 370,000 tonnes. MPOB reported PKO stocks rosea mere 284 tonnes to 353,345 tonnes at end-Nov. Total of stocks PK/PKO,oil basis, were also practically unchanged at 407,100 tonnes. The price ofPKO meanwhile widened its discount to CPO in the domestic market to around100 ringgit on Mon-Wed this week.Given that the near-term fundamentals of PO and, to some extent, ofglobal oils and fats have not changed much in recent weeks, it is no realsurprise the trading range of PO this week is quite similar to thecorresponding period of last month. Likewise for SBO, China has formallyjoined the WTO on December 11. While the agreed-upon significantly highertariff-rate quotas (TRQs) for imports of PO and other oils for 2002 willsoon be issued, one should not hastily assume Chinese importers will rushto fully utilise the quotas.
