• The Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for May 2017. Palm oil inventory in Malaysia edged down in May after rising in the prior two months. Palm inventory declined by 2.6% from 1.60mil tonnes in April to 1.56mil tonnes in May. Consensus was expecting an inventory of 1.61mil tonnes for the month of May. The MoM fall in palm stockpiles in May was driven by a 17.3% increase in CPO exports. This compensated for a 6.9% increase in CPO output.

• Domestic disappearance of palm oil slid by 10.2% from 341,773 tonnes in April to 306,925 tonnes in May. Comparing 5M2017 against 5M2016, domestic disappearance of palm oil surged by 16.6% to 1.38mil tonnes. We are unsure as to the reason for the rise in the domestic disappearance of palm oil in 5M2017. After all, the implementation of B10 biodiesel policy in Malaysia has been delayed.
   
• Palm imports climbed by 74.5% from 296,493 tonnes in 5M2016 to 517,513 tonnes in 5M2017. Due to negative refining margins in Malaysia in 1Q2017, we are not surprised that downstream companies in Malaysia have been buying cheaper CPO from Indonesia to be used as feedstock. There is incentive for Indonesian companies to export further as the export tax rate has been kept at zero percent for the month of June 2017. On a monthly basis however, Malaysia's palm imports shrank by 6.5% to 116,085 tonnes in May.
   
• CPO output in Malaysia grew by 18.9% YoY in 5M2017. On a monthly basis, CPO production rose by 6.9% from 1.55mil in April to 1.65mil tonnes in May. CPO output in Sabah climbed by 7.8% MoM to 461,650 tonnes in May while in Peninsular Malaysia, CPO production expanded by 5.5%. CPO output in Sarawak improved by 9.3% from 299,824 tonnes in April to 327,777 tonnes in May.
   
• Malaysia's palm exports climbed by 17.3% MoM to 1.5mil tonnes in May. Comparing 5M2017 against 5M2016, palm exports rose by 18.9%. The MoM increase in palm demand in May was underpinned mainly by a 70.1% improvement in shipments to India and 199.9% surge in exports to Iran. These helped offset a 17.6% fall in China's demand and 24.8% slide in shipments to the USA.
   
• India was the largest buyer of Malaysia's palm products, accounting for 13.6% of exports in 5M2017. This was followed by China (9.7%), the Netherlands (6.7%), Pakistan (4.9%), Turkey (3.8%) and Iran (3.4%).
   
• Biodiesel exports slid from 37,857 tonnes in April to 32,087 tonnes in May. Biodiesel exports amounted to 125,592 tonnes in 5M2017 vs. 32,222 tonnes in 5M2016. Going forward, we expect biodiesel demand to soften as fossil fuel is cheaper than CPO. Maintain NEUTRAL on the plantation sector.

Source: AmInvest Research - 14 Jun 2017