Palm oil stocks to reach 7-month high

by ANIS HAZIM / pic by TMR

MALAYSIA’S palm oil stocks are expected to rise by 10.5% month-on-month (MoM) to 1.68 million tonnes at the end of June 2022 due to higher output and lower exports, said CGS-CIMB Securities Sdn Bhd (CGS-CIMB Research).

CGS-CIMB Research said in a note yesterday that the stock forecast will push the palm oil inventory level to a seven-month high.

“Our June 2022 forecasts palm oil stock level in Malaysia of 1.68 million tonnes is 11% below the ten-year historical June average of 1.89 million,” CGS-CIMB said in the note.

Malaysia’s crude palm oil (CPO) output is likely to grow by 6.8% MoM, but fell 2.9% year-on-year (YoY) to 1.56 million tonnes in June 2022, based on a survey by CGS-CIMB Futures Sdn Bhd.

“The MoM increase was driven by seasonal factors and a lower base in May due to holidays,” the report stated.

Additionally, Malaysia’s palm oil exports will likely fall by 10.4% MoM and 14.2% YoY to 1.2 million tonnes, based on export statistics by cargo surveyors Intertek by 10.4% MoM, SGS (7.4%) and Amspec Malaysia (13.4%).

To recap, Malaysia’s CPO prices have fallen sharply over the past two weeks by 30% to RM4,698 per tonne since Indonesia removed its export ban on May 23.

“The bulk or 91% of the price declines, occurred since June 10, after Indonesia provided more clarity on the export process as it replaced the export ban with the domestic market obligation.”

Meanwhile, CGS-CIMB’s estimates suggested that the changes in export policy throughout the first half of 2022 may have led Indonesia’s palm oil stocks to rise to as high as eight million to 8.5 million tonnes at the end of June 2022.

“We are of the view that to clear the excess stockpile, Indonesia’s palm producers will need to entice buyers by lowering CPO price, causing local and international CPO prices to fall significantly in recent weeks,” the report stated further.

The research house forecast that CPO prices could stay weak during the adjustment period and trade at larger discounts over competing for edible oils until Indonesia’s palm oil stocks fall to the four million to five million tonnes level.

On Sunday, Plantation Industries and Commodities Minister Datuk Zuraida Kamaruddin said that CPO prices are not expected to fall below RM4,500 per tonne and the norm would be between RM4,500 and RM5,000 per tonne which is currently happening now.