The Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for April 2022. After falling over the past 5 months, Malaysia’s palm inventory rose by 11.5% to 1.6mil tonnes as of end-April from 1.5mil tonnes as of end-March. The increase in palm stockpiles can be attributed to a 3.6% expansion in production and a 17.7% decline in exports. Bloomberg consensus had expected Malaysia’s palm inventory to be 1.7mil tonnes in April.
Going forward, we think that the country’s palm stockpiles would increase in June underpinned by higher production. However in May, palm inventory may continue to be low as buyers switch from Indonesia to Malaysia. Recall that in April, Indonesia banned exports of its crude and refined palm products.
Malaysia’s palm imports slid by 7% MoM to 93,430 tonnes in April in spite of Indonesia’s cancellation of the 30% domestic market obligation in March. We think that palm imports would continue to decline in May due to Indonesia’s export ban, which was announced in April. Malaysia’s palm imports amounted to 446,123 tonnes in 4M2022, 22.5% lower than the 575,342 tonnes achieved in 4M2021. Domestic disappearance of palm oil rose by 20.5% to 331.751 tonnes in April from 291,764 tonnes in March as HORECA activities picked up during the fasting month. Comparing 4M2022 against 4M2021 however, domestic disappearance of palm oil edged down by 2% YoY to 1.1mil tonnes.
Malaysia recorded a CPO production growth of 1.5% YoY in 4M2022 as FFB yields improved. Oil World is currently forecasting the country’s CPO output to rise by 1mil to 1.1mil tonnes in 2022F from 18.1mil tonnes in 2021. On a monthly basis, the 3.6% improvement in CPO output in April was led mainly by a 5.2% rise in Sarawak. CPO production in Sarawak rose by 5.2% to 293,482 tonnes in April from 278,933 tonnes in March while in Sabah, palm output increased by 4.6%. In Peninsular Malaysia, CPO production edged up by 2.7% MoM to 840,253 tonnes in April.
Malaysia’s palm exports plunged by 17.7% to 1.1mil tonnes in April from 1.3mil tonnes in March. The fall in exports in April was largely due to a 23.2% decline in demand from the EU and 50.9% contraction in shipments to China. China’s demand was weak as it was affected by the Covid-19 lockdowns in Shanghai and Beijing. Comparing 4M2022 against 4M2021, Malaysia’s palm exports improved by 5.1% to 4.6mil tonnes.
We remain UNDERWEIGHT in the plantation sector. We think that CPO prices would soften going forward dragged by higher production and Indonesia’s resumption of exports. Currently, we are assuming an average CPO price realised of RM4,000/tonne for the large planters in our coverage.
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