Malaysia’s September palm oil stock may have surpassed October 2019 levels


MALAYSIA’S palm oil stock in September 2022 may have surpassed the previous high set three years ago.

A local research house has estimated Malaysia’s palm oil inventory probably grew by 10.4% month-on-month (MoM) and 32.4% year-on-year (YoY) to 2.3 million tonnes at the end of September 2022, its highest level since October 2019, due to higher output.

The estimate of 2.3 million tonnes for September 2022F palm oil stock level in Malaysia is 9.5% above the 10-year historical September average of 2.1 million tonnes, according to a report released by CGS-CIMB Securities Sdn Bhd (CGS-CIMB Research) today. The official figures will be released on Oct 11.

Findings from a survey of planters by the CGS-CIMB Research’s Futures team revealed that Malaysia’s crude palm oil (CPO) output likely grew by 3% MoM and 4% YoY to 1.78 million tonnes in September 2022.

It noted that September/October have historically been the peak production months for Malaysian palm oil.

The report also commented on Indonesia’s plans to extend palm oil export levy waiver till year-end, as announced on Oct 4.

The extension is because the government does not see the need to collect levies, which are mostly used to subsidise biodiesel, as palm oil prices are currently lower than gas oil.

The extension will help boost shipments of palm oil from Indonesia further and support local fresh fruit bunch prices, the report added.

If not for the extension, the waiver of Indonesia’s export levy which commenced on July 15, would have ended on Oct 30.

Indonesia announced a fixed CPO reference price of US$792 (RM3,675)/tonne for Oct 1 to 15, 2022 (vs US$846/tonne for Sept 16 to 30, 2022), which would lower the palm oil export tax to US$33/tonne (RM151/tonne) vs US$52/tonne during Sept 16 to 30, 2022.

This would place Indonesia’s export tax lower than Malaysia’s RM322/tonne, based on an 8% duty at a reference price of RM4,033 per tonne for October, it said.

“We believe the extension of export levy waiver till year-end will help improve Indonesia’s palm oil competitiveness against Malaysia as we head into the peak production month of October, and could lead to weaker palm oil exports from Malaysia,” it said.

Indonesia’s palm oil stock as at the end of July 2022 fell to 5.9 million tonnes from 6.7 million tonnes as at the end of June, but remained higher than the 4.13 million tonnes recorded as at the end of December 2021.