• The Malaysian Palm Oil Board (MPOB) has released the country's palm statistics for August 2024. Malaysia's palm inventory rose 7.3% to 1.9mil tonnes in August from 1.8mil tonnes in July. August stocks of 1.9mil tonnes were within Bloomberg consensus. The increase in inventory can be attributed to a 2.9% expansion in palm production and 9.7% drop in exports. Going forward, we think that palm inventory could reach 2mil tonnes due to the peak output season. CPO production is expected to reach its highest level in October or November.

• Domestic consumption of palm products rose 1.6% to 263,610 tonnes in August from 259,468 tonnes in July. We believe that HORECA activities could accelerate ahead of the year-end holiday and festive season. Comparing 8M2024 against 8M2023, domestic consumption of palm products slid 3.9% to 2.6mil tonnes due to softer economic activities.

• Palm imports amounted to 23,696 tonnes in August, 28.4% MoM lower. We believe downstream companies stocked up in July after Indonesia raised CPO export tax and levy. We estimate the price discrepancy between CPO in Malaysia and Indonesia to be at least US$118/tonne (RM521/tonne) each in July and August compared to US$93/tonne (RM438/tonne) in June. On a yearly basis, palm imports dived 64.9% to 280,062 tonnes in 8M2024 as the price differential with Indonesia was small and global demand for oleochemicals was weak in 1H. Demand for oleochemicals is envisaged to pick up in 2H2024 due to re-stocking by the EU.

• Malaysia recorded CPO production growth of 10.2% YoY in 8M2024. MPOC (Malaysian Palm Oil Council) forecasts the country's CPO output to improve by 2.4% to 19mil tonnes in 2024E (2023: 18.6mil tonnes). The 2.9% MoM expansion in CPO production in August was driven mainly by an 8.5% increase in Sabah and 4.6% rise in Sarawak. In Peninsular Malaysia, CPO output inched up 0.5% MoM to 1.1mil tonnes in August.

• CPO exports dropped 9.7% MoM to 1.5mil tonnes in August after surging 39.9% in July. According to Intertek, palm shipments to India fell 24.2% and exports to China slid 23.8% in August. EU also bought 23.4% less palm products from Malaysia.

• We are NEUTRAL on the plantation sector as large harvests of corn and soybean are expected to cap upside to CPO prices. Our 2024E 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 Sep 2024