• The Malaysian Palm Oil Board (MPOB) has released the country’s palm statistics for July 2024. Palm stockpiles slid for the 1st time in 3 months, underpinned by robust exports. Palm exports surged by 39.9% MoM to 1.7mil tonnes in July. In comparison, Malaysia’s palm exports usually range between 1.2mil and 1.5mil tonnes per month. Malaysia’s palm inventory stood at 1.7mil tonnes as of end-July vs. 1.8mil tonnes as of end-June. July’s stocks of 1.7mil tonnes were below Bloomberg consensus of 1.9mil tonnes.

• Domestic consumption of palm products fell by 20.8% to 280,978 tonnes in July from 356,763 tonnes in June as HORECA and transportation activities eased after rising in the past 2 months. On a yearly basis, domestic consumption edged down by 3.3% to 2.3mil tonnes in 7M2024.

• On the other hand, palm imports climbed by 44.2% MoM to 33,094 tonnes in July as demand for oleochemical products picked up and price differential widened between CPO in Malaysia and Indonesia. Average monthly CPO export tax and levy in Indonesia was US$118/tonne (RM551/tonne) in July vs. US$93/tonne (RM434/tonne) in June.

• CPO production rebounded by 14% MoM to 1.8mil tonnes in July after slipping by 5.2% in June. The monthly recovery in production in July was driven by an 18.6% increase in Sarawak and 15.3% expansion in Peninsular Malaysia. Compared to the strong growth in Sarawak and Peninsular Malaysia, CPO output in Sabah rose by a mere 5.4% MoM to 344,754 tonnes in July.

• Comparing 7M2024 against 7M2023, CPO production rose by 10.5% to 10.7mil tonnes. Industry experts expect Malaysia’s CPO output to be flat at 18.6mil tonnes in 2024E.

• The 39.9% MoM surge in palm exports came after a 12.8% retreat in June. According to Intertek, China’s palm demand jumped by 21.8% MoM to 138,765 tonnes in July while shipments to India climbed by 25.5% to 385,875 tonnes. Malaysia’s palm exports to the EU rose by 12% in July.

• We are NEUTRAL on the plantation sector. We reckon that CPO prices would be capped by increased supply of competing oils such as corn and soybean oil. Our average CPO price assumptions for 2024E are RM4,000/tonne for the pure Malaysian planters and RM3,700/tonne for those with Indonesian operations.

Source: AmInvest Research - 13 Aug 2024