July CPO production to increase by eight per cent
KOTA KINABALU: Malaysia’s crude palm oil (CPO) production for July 2018 has been projected by analysts to to increase by eight per cent month on month (m-o-m) while for overall 2018, it is expected to reach above the 20 million metric tonne (MT) level for the first time.
As per the Malaysian Palm Oil Board’s (MPOB) latest statistics, CPO production for the first half of 2018 (1H18) amounted to 8.92 million MT, up from 8.72 million MT during the corresponding period the previous year.
For June 2018, production was at 1.33 million, down from 1.51 million in June 2018.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the 12 per cent year on year (yo-y) decline in production is the second consecutive y-o-y but this could be caused by fasting month and Hari Raya effect.
“Going forward, we expect July production to increase by eight per cent m-o-m to 1.44 million tonnes,” MIDF Research said.
Meanwhile, Affin Hwang Investment Bank Bhd (Affin Hwang) expected Malaysia’s CPO production to improve in 2H18.
Affin Hwang also forecasted the production in 2018E to reach above the 20 million MT level, compared to 19.92 million MT in 2017, for the first time.
The research firm noted that the Oil World 2018 CPO production forecast was at 20.5 million MT.
On the palm oil inventory level, MPOB’s statistics revealed that the closing stock for end-June 2018 amounted to 2.19 million, up from 1.53 million last year.
Looking ahead, MIDF Research expected export to increase by five per cent m-o-m to 1.19 million tonnes as the research arm expected demand to improve in the Northern Hemisphere as palm oil usage tends to increase during summer season.
However, for exports of palm oil, it declined by 13 per cent m-om to 1.13 million in June 2018.
“The decline of 13 per cent mo-m in export volume was more severe than estimated,” MIDF Research said.
“This could be explained by weak export to China which has declined by 19 per cent m-o-m to 155,586 tonnes.
“We believe that the concern over trade war with US has caused the consumers in China to take a cautious stance and hence they have minimise their purchase in the near term.”
As the latest inventory data came in above market expectation, MIDF Research expected the news to negatively affect CPO price.
“Having said that, we believe that the downside is limited as we expect strong Brent Crude Oil price to lend support for movement of CPO price.”
As such, the research arm maintained its average CPO price forecast of RM2,400 per tonne for 2018.
Affin Hwang’s also maintained its CPO average selling price (ASP) assumption for 2018-19E at RM2,600 per MT to RM2,500 per MT.