AmInvest Research Reports

PLANTATION - Strong Production in May

Publish date: Tue, 11 Jun 2024, 10:25 AM
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  • The Malaysian Palm Oil Board (MPOB) has released the country’s palm statistics for May 2024. Malaysia’s palm inventory rose for the 2nd time in a row. Palm stocks inched up to 1.75mil as at end-May from 1.74mil tonnes as at end- April. This was below Bloomberg consensus of 1.8mil tonnes. The small rise in palm inventory in May can be attributed a 13.5% expansion in CPO production, which was offset by a 24.8% climb in domestic consumption and 11.7% increase in exports. Going forward, we believe that Malaysia’s palm inventory would exceed 2mil tonnes in 2H2024 as oil palm trees enter the peak production period.
  • Domestic consumption of palm production expanded by 24.8% MoM to 353,530 tonnes in May as transportation activities resumed after the Hari Raya festivities in April. On a yearly basis, domestic consumption of palm products edged up by 1.6% to 1.7mil tonnes in 5M2024.
  • Palm imports slid by 23% to 36,603 tonnes in May from 47,536 tonnes in April. Comparing 5M2024 against 5M2023, palm imports dived 53.5% YoY to 200,320 tonnes. We believe that Malaysian downstream companies are importing fewer palm products from Indonesia this year as global demand for oleochemical products is weak with a small price differential between CPO in Indonesia and Malaysia at US$123/tonne (RM582/tonne) in 5M2024 (5M2023: US$175/tonne).
  • After a weak 1Q2024, Malaysia’s CPO production is picking up. CPO output expanded by 7.9% MoM in April and 13.5% MoM in May. We believe that FFB yields are finally recovering after being affected by labour shortage and lagged impact of unfavourable weather conditions in the past years. In May, CPO production in Peninsular Malaysia climbed by 16.8% MoM to 999,159 tonnes while in Sarawak, CPO output grew by 16.2%. Sabah bucked the strong output trends of Peninsular Malaysia and Sarawak by recording a small increase of 3% in May. Comparing 5M2024 against 5M2023, Malaysia’s CPO output growth was robust at 9.4%.
  • Palm exports rose by 11.7% MoM to 1.4mil tonnes in May. On a yearly basis, Malaysia’s palm exports improved by 6.7% to 6.3mil tonnes in 5M2024 compared to a 9.4% increase in production. According to Intertek, Malaysia’s palm shipments to China jumped 59% MoM in May while exports to India soared 41.1%. On the other hand, palm shipments to the EU edged down by 0.7%.
  • We are NEUTRAL on the plantation sector. We believe that higher palm supply in 2H2024 would cap the upside to CPO prices. Our average CPO price assumptions are RM4,000/tonne for pure Malaysian planters and RM3,700/tonne for those with Indonesian operations.

Source: AmInvest Research - 11 Jun 2024

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