• The Malaysian Palm Oil Board (MPOB) has released the country's palm statistics for September 2024. Palm inventory rose by 6.9% to 2mil tonnes as at end-September from 1.9mil tonnes as at end-August. The inventory of 2mil tonnes exceeded Bloomberg consensus of 1.9mil tonnes. The MoM rise in palm inventory in September can be attributed mainly to a 36.3% plunge in domestic consumption. In contrast to expectations, CPO production slipped by 3.8% MoM in September instead of going up. We think that CPO output would rise in October before declining in November due to seasonal factors.
• We think that domestic consumption of palm products declined in September as economic activities took a breather during the long weekend break in the middle of the month. Comparing 9M2024 against 9M2023, domestic consumption slid by 13.4% YoY to 2.7mil tonnes in 9M2024.
• Palm imports fell by 30.9% MoM to 16,369 tonnes in September even though the price differential between CPO in Malaysia and Indonesia widened. We estimate the price disparity to be at least RM600/tonne in September vs. RM520/tonne in August. Indonesia raised the CPO export tax and levy to US$142/tonne (RM606/tonne) in September from US$118/tonne (RM521/tonne) in August. Going forward, imports may rise as the CPO export tax and levy remained high at US$141/tonne in October.
• CPO production rose by 8.7% YoY to 14.4mil tonnes in 9M2024. We think that Malaysia's CPO production would be 19mil tonnes in 2024E, 2.4% higher than 2023's 18.6mil tonnes. All states in Malaysia recorded stronger output in 9M2024 except for Sabah. CPO output in Sabah slid by 4.8% YoY to 3.1mil tonnes in 9M2024 due to floods in the beginning of the year. We attribute the healthy CPO production in Peninsular Malaysia to a higher number of estate workers. CPO production in Pahang soared by 26.6% YoY in 9M2024 while in Johor, CPO output surged by 16.9%.
• Palm exports edged up by 0.9% MoM to 1.5mil tonnes in September after falling by 9.5% in August. According to Intertek, Malaysia's palm shipments to China jumped by 28.7% MoM in September while exports to the EU rose by 28.1%. On the flip side, shipments to India inched down by 1.9% partly due to the hike in import duties. We believe that EU's palm demand would remain healthy ahead of the implementation of the EUDR (EU Deforestation Regulation) in December 2025.
• We are NEUTRAL on the plantation sector as palm inventory may continue rising in October. 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 Oct 2024