Malaysian palm oil inventories may grow 11 pct in November

KUCHING: The research arm of CIMB Investment Bank Bhd (CIMB Research) estimates that Malaysian palm oil inventories may have grown by 11 per cent month on month (m-o-m) in November.

Findings from a survey of 25 plantation areas by the CIMB Futures team revealed that Malaysian crude palm oil (CPO) output fell 3.5 per cent m-o-m to 1.62 million tonnes in November 2016.

“Palm oil exports fell by approximately 11.8 per cent m-o-m, based on export statistics released by SGS and ITS,” it said in a sector outlook.

Overall, the research arm estimated that inventories may have grown by 11 per cent m-o-m to 1.75 million tonnes towards the end of November. Official figures will be released on December 12.

Looking at production, CIMB Research highlighted that the projected 3.5 per cent drop in fresh fruit bunch (FFB) output was below the historical November m-o-m average growth of 11 per cent over the past five years, due to the lower production base in October.

“This is also lower than our earlier projection of a five per cent mo-m decline in output,” it said.

CIMB Research noted that year on year (y-o-y), CPO output is expected to fall two per cent in November as the El Nino has continued to affect FFB yields.

The research arm’s survey revealed that output from Sarawak and Sabah estates fell approximately 5.5 per cent and 5.1 per cent m-o-m, respectively, while the Peninsular Malaysia estates posted a flattish output growth.

CIMB Research estimated that Malaysian palm oil exports fell circa 12 per cent m-o-m in November 2016, based on estimates from cargo surveyor SGS (down 13 per cent m-o-m) and ITS (down 11 per cent m-o-m).

This was higher than the research arm’s projection for exports to fall by five per cent m-o-m, due mainly to weaker demand from India (down 38 per cent m-o-m) and Pakistan (down 63 per cent m-o-m).

“The weak exports to India could be partly due to the removal of high-value rupee notes, which forms 86.4 per cent of the cash in circulation,” it said.

Meanwhile, CIMB Research noted that the expectation of higher stocks in November could cap the rise in CPO prices.

CIMB Research’s survey of Indonesian planters revealed a three per cent m-o-m drop in output from estates located in Sumatra and Kalimantan, Indonesia in November 2016.

The research arm’s projected end-November stock level of 1.75 million tonnes remains low as it represents a 40 per cent decline from a year-ago level and around 1.2 months coverage of average monthly palm oil exports from Malaysia.