KUALA LUMPUR (Nov 4): Malaysia’s palm oil stocks are likely to have fallen 8% month-on-month (m-o-m) to 1.59 million tonnes at end-October, the lowest for the month since 2016, due to lower output, coupled with higher exports, said CGS-CIMB.
The research house’s analyst Ivy Ng said in a note today that a survey by CGS-CIMB Futures revealed that on a yearly basis, the palm oil inventory is likely to have declined by 33% at end-October.
The survey also showed that October palm oil output probably fell 6% m-o-m to 1.76 million tonnes, while export volume remained robust, rising by 5% m-o-m to 1.7 million tonnes.
She said production in October appeared to be below the potential average of 1.89 million tonnes over the past 10 years, which could be due to the implementation of movement restrictions in Sabah since Sept 29 to control rising Covid-19 cases, and a worker shortage due to the current freeze on foreign worker permits.
Ng suspected that the stronger exports could be partly due to attractive crude palm oil (CPO) price discounts, against other key edible oils, as sunflower seed oil was adversely impacted by a drought in the Black Sea region.
Meanwhile, traders could be stocking up ahead of the Deepavali celebration on Nov 13, she said.
“Tighter inventories, concerns over labour issues in Malaysia and weather concerns are likely to keep CPO prices firm in November,” said Ng.
According to her, the average CPO price rose 1.9% m-o-m and 42% year-on-year (y-o-y) to RM2,980 per tonne in October due to concerns over the relatively low inventory levels of palm oil in Malaysia and Indonesia, and tightness in supplies of other key competing edible oils.
“We project CPO prices to trade at RM2,600 to RM3,200 per tonne in November in view of the projected low inventory in Malaysia, which will take time to rebuild, while Indonesia is determined to work out a mechanism (potentially via a higher export levy) to fund its B30 mandate beyond 2020,” said Ng.
The analyst maintained her "neutral" call for the plantation sector, with Genting Plantations Bhd, Hap Seng Plantations Holdings Bhd and Ta Ann Holdings Bhd as her top picks.