• The Malaysian Palm Oil Board (MPOB) has released the country’s palm statistics for February 2024. Palm inventory continued to decline due to soft CPO production. Palm stockpiles slid by 5% to 1.9mil tonnes as at end-February from 2mil tonnes as at end-January. The inventory of 1.9mil tonnes in February was within Bloomberg consensus estimates. We believe that Malaysia’s CPO production would remain low until May i.e. after the Hari Raya festivities end in April.

• Domestic consumption of palm products rose by 11.9% YoY to 751,425 tonnes in 2M2024 as HORECA activities remained robust. Comparing February against January, domestic consumption inched up by 2.6% to 380,537 tonnes due to the Chinese New Year festivities. Palm imports plunged by 63.4% YoY to 82,601 tonnes in 2M2024 as the price differential between CPO in Malaysia and Indonesia narrowed. We attribute this to the reduction in Indonesia’s CPO export tax and levy. Average CPO export tax and levy was US$106/tonne (RM501/tonne) in 2M2024 vs. US$156/tonne (RM679/tonne) in 2M2023.

• On a monthly basis, palm imports fell by 24.6% to 35,521 tonnes even as the price differential widened. We estimate the price differential at US$118/tonne (RM563/tonne) in February compared to US$93/tonne (RM436/tonne) in January. This is based on the CPO export tax of US$33/tonne and export levy of US$85/tonne in February vs. US$18/tonne and US$75/tonne respectively in January.

• CPO production in Malaysia was flat at 2.6mil tonnes YoY in 2M2024. On a monthly basis, however, CPO output shrank by 10.2% to 1.3mil tonnes in February. CPO production in Sabah dived by 14.9% MoM to 290,508 tonnes in February while in Peninsular Malaysia, CPO output slid by 6%. CPO output in Sarawak retreated by 14.9% MoM to 275,511 tonnes in February.

• CPO exports rose by 4.4% YoY to 2.4mil tonnes in 2M2024 in contrast to a flat production. Comparing February against January, CPO exports contracted by 24.7% to 1mil tonnes. According to Intertek, palm shipments from Malaysia to India retraced by 10.3% while EU’s purchases slumped by 17.3%. On the other hand, palm exports to China rose by 19% MoM in February.

• \We are NEUTRAL on the plantation sector. Palm demand is currently weak as CPO prices are more expensive than soybean oil in a few countries. In addition, soft prices of soybean and corn could cap the upside to CPO prices. Our average CPO price assumptions for 2024F are RM4,000/tonne for pure Malaysian planters and RM3,700/tonne for those with Indonesian operations.

Source: AmInvest Research - 12 Mar 2024