- Malaysian Palm Oil
Board (MPOB) has released the country’s palm oil statistics for July 2012. For
the first time in five months, palm oil inventory in Malaysia rose. Palm oil
stocks stood at 2mil tonnes as at end-July 2012, 17.6% higher than the 1.7mil
tonnes recorded as at end-June 2012. The country’s palm oil inventory of 2mil
tonnes for July was above consensus estimate of 1.87mil tonnes.
- The MoM increase in
palm oil inventory was due to a recovery in palm oil production and fall in
exports.
- From January to
July 2012, average CPO price was RM3,175/tonne in Malaysia. This was 8.2% lower
than the average price of RM3,457/tonne recorded in the same period in 2011. Average CPO price of
RM3,032/tonne in July was relatively unchanged compared with June’s average
price of RM2,956/tonne.
- Based on the latest
prices, the disparity between CPO and soybean oil is about 20.6% or
US$238/tonne. In comparison, the average
price discount between the two commodities was 15.3% in June.
- After months of
weak growth in production, palm oil output in Malaysia climbed 15.0% MoM to
1.69mil tonnes in July. CPO production is expected to rise further in the
coming months due to seasonal reasons. Although CPO production in July was 3.4%
lower YoY, the rate of decline is easing. CPO production in Malaysia shrank at
an average rate of 17% per month from March to June 2012.
- In the seven months
of the year, CPO production in Malaysia fell 8.1% YoY. For the full year, MPOB
has forecast the country’s CPO output at 18.4mil tonnes (2011: 18.9mil tonnes).
As for Indonesia, CPO production is expected to grow at a slower rate of 4.9%
in 2012F compared with 2011’s 9% increase. Recently, the Indonesian government
revised its 2012F forecast of CPO production downwards by 8.2% from 25.7mil
tonnes to 23.6mil tonnes.
- Exports were weak
in July. Palm oil exports from Malaysia fell 15.3% MoM and 25.3% YoY to 1.3mil
tonnes in July. Going forward, we believe that the increase in the quota of
CPO, which can be exported tax-free, would help boost demand. Recall that
recently, the Malaysian government increased the export quota of tax-free CPO
by two million tonnes. Due to the fall in exports and rise in inventory, stock
usage ratio rose from 1.1x in June to 1.5x in July.
-The MoM fall in
exports in July can be attributed to a 37.3% MoM decline in demand from China.
India had also bought 39.3% less palm oil in July compared to June.
- Palm oil exports to
China surged 38.2% MoM in June. Hence, it was not surprising that China would
import less in July after the jump in exports in June.
- In spite of the weak
MPOB data in July, we remain positive on the plantation sector. We believe that
importers would have to buy more palm oil in the coming months as prices of
soybean and corn have become too expensive. Additionally, CPO production is
expected to enter the low output season in 4Q2012, which should support prices further.
Source: AmeSecurities
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