• The Malaysian Palm Oil Board (MPOB) has released the country’s palm statistics for March 2024. Malaysia’s palm inventory declined for the 5th month in a row. Palm inventory slid by 10.7% to 1.7mil tonnes in March from 1.9mil tonnes in February as the 28.6% surge in exports compensated for a 10.6% expansion in production.

• We believe that CPO output would continue to be low in April as workers returned home for the Hari Raya festivities. We reckon that palm production and inventory would start rising from May onwards. Malaysia’s palm inventory of 1.7mil tonnes in March was marginally below Bloomberg consensus estimates of 1.8mil tonnes.

• Domestic consumption of palm products rose by 7.8% YoY to 1.1mil tonnes in 1Q2024, underpinned by higher transportation and HORECA activities. On a monthly basis, however, domestic consumption retreated by 15.4% to 313,563 tonnes in March as economic activities took a breather during the fasting month. Palm imports continued to ease. Palm imports plummeted by 59.4% to 116,181 tonnes in 1Q2024 from 286,099 tonnes in 1Q2023. We attribute this to weak global demand for oleochemical and refined products and the small price differential between CPO in Malaysia and Indonesia. Indonesia’s CPO export tax and levy was unchanged at US$118/tonne (RM555/tonne) in March.

• CPO production grew by 3.4% YoY to 4.1mil tonnes in 1Q2024. MPOB forecasts the country’s CPO output to inch up to 18.8mil tonnes in 2024F from 18.6mil tonnes in 2023. Comparing March against February, CPO production rose by 10.6% to 1.4mil tonnes on the back of a higher number of working days. CPO output in Peninsular Malaysia increased by 15% MoM to 797,280 tonnes in March while in Sabah, CPO production rose by 10.5%. On the other hand, in Sarawak, CPO output edged down by 0.4% to 274,477 tonnes in March.

• CPO exports inched down by 1.6% YoY to 3.7mil tonnes in 1Q2024 compared to the 3.4% rise in production. On a monthly basis, CPO exports jumped by 28.6% to 1.3mil tonnes in March. According to Intertek, Malaysia’s palm shipments to India climbed by 42.6% in March while exports to China were flat. On a negative note, palm shipments to EU fell by 14.5%.

• We are NEUTRAL on the plantation sector. We believe that CPO prices would start softening from May onwards as the industry enters the peak production period in 2H2024. Also, soybean prices may remain low due to the higher production in US. According to the Prospective Plantings Report, US farmers would be planting 86.5mil acres of soybean in 2024F (2023: 83.6mil acres) compared to 90mil acres for corn (2023: 94.5mil acres).

Source: AmInvest Research - 16 Apr 2024