CPO to trade at RM1,900-RM2,200

PETALING JAYA: Crude palm oil (CPO) is expected to trade between RM1,900 and RM2,200 per tonne this month as rising optimism on lower stockpile will likely be offset by weaker demand from India following the major edible oil importer’s move to raise the import duty on palm oil by 5%, according to analysts.

The Malaysia Palm Oil Board (MPOB) is expected to release the official August palm oil statistics i.e. stocks, exports and production today.

CGS-CIMB Research, in its latest agribusiness report, expected a silver lining for palm oil stocks in end-August.

“Palm oil stocks may have fallen by 6.4% month-on-month (m-o-m) to 2.24 million tonnes as at end-August as stronger exports trumped output,” it added.

A survey by the CIMB Futures team also reveals that Malaysia’s CPO output probably grew 3.8% m-o-m and 11.3% y-o-y to 1.8 million tonnes in August 2019.

Meanwhile, palm oil exports will likely grew by 17% m-o-m and 58% y-o-y, based on average export statistics by SGS, ITS and Amspec. The research unit said: “We are positive on this news as it will help support the near-term prices, but this is offset by concern that supply could rise in fourth quarter of 2019.“Overall, we estimate Malaysia’s palm oil inventory will likely declined 6.4% m-o-m and 11% y-o-y to 2.24 million tonnes at end-August 2019. This would represent for the first time in 2019 that palm inventory is set to be below a year ago level,” said CGS-CIMB Research. It pointed out that August output rises due to seasonal factors and more working days.

“The projected 3.8% m-o-m rise in CPO output in August is lower than the historical average m-o-m improvement of 9.8% for the August month over the past five years, likely due to higher production base in Jul. Our projected CPO output for Aug 2019 is 11% higher y-o-y, suggesting that fresh fruit bunches (FFB) yields remain strong.

“Therefore, we maintain our forecast for local CPO output to rise by 3.9% to 20.27 million tonnes in 2019.”

As for exports, CGS-CIMB Research estimated that local palm oil exports rose 17% m-o-m to 1.74 million tonnes for the month under review, based on estimates from cargo surveyors SGS (16% m-o-m), ITS (16% m-o-m) and Amspec Malaysia (19% m-o-m).

It noted that the stronger m-o-m exports were likely due partly to stocking up by traders in India, in anticipation of potential 5% hike in refined palm oil import duties from Malaysia recently.

Based on export estimates from independent cargo surveyor SGS, India and China posted 17% and 156% m-o-m increases, respectively, in palm oil import volumes from Malaysia in August.

The research unit is maintaining a “neutral” call on the sector.

“We estimate that planters’ earnings could have bottomed in second quarter of 2019.

However, the sector lacks significant re-rating catalysts as the rebound in CPO price may be impacted by concerns over slower growth.

Source : The Star

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