Higher palm oil stockpile on weak exports in February?
KUALA LUMPUR: Malaysia’s crude palm oil (CPO) production is likely to be rather flat month-on-month (m-o-m) in February at 1.12 million tonnes, according to Affin Hwang Capital.
This will be due partly to a crop recovery, especially at Peninsular Malaysia estates but offset by fewer working days during the month as well as some protective measures at the estates (testing of workers) against the spread of Covid-19.
“Estates in Peninsular Malaysia reported a m-o-m increase in CPO production, while CPO production in Sabah and Sarawak are likely to be lower m-o-m.
“For March, we expect Malaysia’s CPO to rise by eight per cent m-o-m, after a low base in February and as weather conditions slowly improve after the seasonal monsoon and La Nina factors,” Affin Hwang said in a report today.
The firm expects a six per cent lower exports of palm-oil products in February to 890,000 tonnes as some of the main buyers would probably slowdown their purchases given the high prices as well as the reinstatement of the Malaysian export tax since January 1 this year.
This would likely be the lowest monthly exports since February 2007, it said.
“Malaysia’s palm-oil inventory in February probably increased for the second consecutive month, up by 13.2 per cent m-o-m to 1.5 million tonnes, partly attributable to the weaker exports,” Affin Hwang said.
The firm said average Malaysia Palm Oil Board-locally-delivered CPO price in February stood at RM3,895.50 per tonne, up 3.9 per cent m-o-m.
It believes prices will remain supported in the first quarter of 2021, underpinned by tight stock levels, concerns over CPO production given the weather uncertainties, and strong prices of other edible oils.
“We expect CPO production to recover from 2Q21 onwards as the weather normalises after the seasonal monsoon and this could pressure prices downward,” said Affin Hwang, keeping its “Neutral” rating on the sector and CPO average selling price assumption of RM2,650-RM2,700 per tonne.
Source: NST