Affin Hwang ‘neutral’ on plantation sector, sees RM2,650-RM2,700 price
KUALA LUMPUR: Malaysia’s crude palm oil (CPO) production is likely to be flat at 1.12 million tonnes last month, said Affin Hwang Capital.
This will partly be due to crop recovery in Peninsular Malaysia but offset by fewer working days as well as Covid-19 testing of workers at estates.
“Estates in Peninsular Malaysia reported a month-on-month increase in CPO production but that’s likely to be lower in Sabah and Sarawak.
“We expect CPO production to rise eight per cent this month from last month’s low base as weather conditions slowly improve after the seasonal monsoon and La Nina factors,” said Affin Hwang in a report yesterday.
The research firm also said it expected a six per cent decline in exports of palm oil products to 890,000 tonnes last month following the reinstatement of the export tax on Jan 1.
That would likely be the lowest monthly exports since February 2007, it said.
“Malaysia’s palm oil inventory probably increased last month for the second consecutive month, up 13.2 per cent to 1.5 million tonnes,” said Affin Hwang.
It said the average Malaysia Palm Oil Board-locally-delivered CPO price stood at RM3,895.50 per tonne last month, up 3.9 per cent from January.
It believed the price would be supported in the first quarter, underpinned by tighter stock levels, concerns over production given the weather uncertainties and strong prices of other edible oils.
“We expect CPO production to recover from the second quarter as weather conditions normalise after the seasonal monsoon. This may pressure prices downward.”
Affin Hwang keeps its “neutral” rating on the sector with a CPO average selling price assumption of RM2,650 to RM2,700 per tonne.