Plantation - Palm oil inventory to decline MoM in April 2012?

- Malaysian Palm Oil Board (MPOB) is scheduled to release the country’s plantation statistics for the month of April on 10 May 2012, Thursday.

- We estimate that the country’s palm oil inventory would stand at 1.7mil tonnes as at endApril 2012. This is about 13% lower than the inventory level of 1.96mil tonnes recorded as at end-March 2012. There is a possibility that the actual inventory level could be lower than our estimate.

- Our estimate is based on the assumption that the country’s palm oil production would decline 2% MoM while exports would expand by 10% MoM in April 2012.

- We think that Malaysia’s palm oil production would either be flat or decline by more than 2% compared to the previous month, in April 2012. 

- Recent production statistics released by a few plantation companies indicated that FFB output was weak MoM and YoY in April 2012.  

- IJM Plantations’ FFB production shrank 15% MoM and 22% YoY while Genting Plantations’ FFB output declined 2% MoM and 25% YoY in April 2012. 

- While the country’s palm oil production is likely to have decreased MoM and YoY in April, exports improved. 

- According to SGS and Intertek, which are independent cargo surveyors, Malaysia’s palm oil exports expanded 9.4% to 10.4% MoM in April 2012. 

- We reckon that the potentially weak palm oil production in April 2012 is due to the highbase impact of April 2011. 

- Recall that the country’s palm oil output only started to recover in April 2011 after being affected by the wet weather from January to March 2011.   

- For instance, Genting Plantations’ FFB production was 9.8% MoM higher in April 2011 while IJM Plantations’ FFB output was 16% stronger in April 2011 compared to the preceding month.

- We maintain a positive stance on the plantation sector. We believe that any correction in the share prices of plantation companies would represent a good opportunity to accumulate.  

Source: AmeSecurities