KUALA LUMPUR – MIDF Research has maintained its positive stance on the oil palm plantation sector, raising the calendar year 2022 (CY22) crude palm oil (CPO) target price by 27.9% to RM5,500 per tonne from RM4,300 per tonne previously.
The research house also expects the CPO price to retain its upward momentum throughout CY22, supported by higher prices of edible oils on the back of supply concerns amidst the prolonged Russia-Ukraine war, Indonesia’s widened export ban, subdued production outlook for soybean and resilient demand outlook as economic activities improve.
“Despite our positive view on the sector, we do expect that CPO prices will ease in the second half of this year (2HCY22) but at a very slow pace.
“Given the higher-than-expected CPO price in 1H2022 as well as previously mentioned factors, we anticipate that the CPO price will remain elevated throughout CY22, supported by tight inventory supply in our local plantation industry,” it said in a note today.
However, the research house noted that key risks to CPO prices are new Covid-19 variants that could result in another worldwide lockdown, above expectation stockpiles and supply of soybean and soybean oil, as well as changing policies in importing countries.
MIDF Research also highlighted that Malaysia’s palm oil production had dipped, with the overall CPO production at 1.46 million tonnes versus 1.57 million tonnes in the previous year, mainly due to lower contribution from all states.
It said for the cumulative five-month period, fresh fruit bunches (FFB) yield dropped to 5.63 tonnes per hectare (t/ha) from 5.81 t/ha previously, mainly due to the impacts of bad weather, compounded by the acute labour shortage.
“We expect production to improve further following more boots on the ground in 2HCY22 to meet the labour shortage,” it noted.
As for exports, Malaysia’s palm oil export volume rose by 26.7% month-on-month (m-o-m) and 7.1% year-on-year (y-o-y) to 1.36 million tonnes in May 2022, as importers turned to Malaysian palm oil following Indonesia’s export ban, it said.
“Even though Indonesia lifted its ban on May 19, 2022, we expect the ongoing Russia-Ukraine war and improving demand on better economic activities would support upside demand for palm oil,” it noted.
Meanwhile, Malaysia’s palm oil inventory level declined by 7.4% m-o-m to 1.52 million tonnes in May 2022 versus 1.64 million tonnes in April, due to lower-than-expected production, amidst higher export demand during the month.
“However, we anticipate Malaysia’s palm oil stockpiles in the second to the third quarter to improve with the higher production cycle,” it added. – Bernama, June 13, 2022
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