KUALA LUMPUR – Malaysia’s palm oil inventory is likely to grow by 1% month-on-month (m-o-m) to 1.62 million tonnes at end-July as weaker exports trumped declining output, according to CGS-CIMB Securities Sdn Bhd.
In a note, the research house said the increase marked a departure from historical trends, which had seen Malaysian palm oil stocks in July rising by an average of 2.9% m-o-m over the past 10 years.
“The palm oil stock level in Malaysia is projected to stay tight as it is 17% below the historical average July palm oil stock levels of 1.95 million tonnes for the past 10 years. Official figures will be released on August 11,” it said.
The country crude palm oil (CPO) output was 1.52 million tonnes in July, down by 5.5% m-o-m due to a shortage of foreign workers.
Besides that, the firm said the widening gap between historical production against estimated achievement for the month of July also reflects ageing trees due to slow replanting, slower new planting rates, restricted movement issues affecting some estates and mills due to rising Covid-19 cases and lower fertiliser input due to logistics issues.
Based on a survey by the CGS-CIMB futures team, East Malaysia estates posted the sharpest m-o-m production declines in July.
On palm oil exports, CGS-CIMB said the volume likely fell by 6.4% m-o-m to 1.33 million tonnes, likely due to lower export to India.
According to cargo surveyors Intertek Testing Services’ data, Malaysia’s exports for July dropped by 5.2% m-o-m, while Amspec Malaysia forecasts that exports decreased 7.7% m-o-m.
For August 2021, CGS-CIMB projects CPO prices to remain firm at between RM3,500 and 4,000 per tonne as it would take time to rebuild inventory and the shortage of workers in Malaysia is unlikely to be addressed until Covid-19 cases are under control.
CGS-CIMB reiterates its “neutral” call on the agribusiness sector. – Bernama, August 5, 2021
