- Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for March 2013. Palm oil inventory in Malaysia declined 10.9% from 2.44mil tonnes as at end-February 2013 to 2.17mil tonnes as at end-March. This was 4.4% below market expectations of 2.27mil tonnes.

- The MoM fall in palm oil inventory was led by a strong growth in exports. Stock usage edged down from 1.75x in February to 1.41x in March.

- In spite of the 4.5% tax rate on exports of CPO in March, demand for palm oil remained robust. As a result, inventory of palm oil in crude form eased 10.7% MoM to 1.2mil tonnes in March, while inventory of processed palm oil shrank 11.1% to 924,789 tonnes.

- Average CPO price was at RM2,332/tonne in March 2013. This was 2.5% lower than the average price of RM2,391/tonne recorded in the previous month. In 1Q2013, CPO price averaged RM2,315/tonne, 27.4% weaker than the average of RM3,190/tonne achieved in the same period last year.

- Average monthly price discount between CPO and soybean oil continued to decline after peaking at 33.3% in December 2012. On average, CPO prices were 23.5% lower than soybean oil in March 2013. In comparison, the average price discount between the two commodities was at 26.6% in February 2013.

- After a seasonally lower palm oil production in the first two months of the year, CPO output inched up 2.2% MoM to 1.33mil tonnes in March 2013.

- The MoM uptick in CPO production in March 2013 was led by a 2.7% expansion in Peninsular Malaysia. Palm oil production in Sarawak inched up 1.5% MoM in March 2013, while CPO output in Sabah rose 1.7%.

- Palm oil exports expanded 10% MoM and 15.7% YoY to 1.54mil tonnes in March 2013. In the first three months of the year, Malaysia shipped out 16.2% more palm oil compared to the same period last year.

- China resumed buying of palm oil in March after purchasing less in February. Exports of Malaysian palm oil to China climbed 76.7% MoM to 418,059 tonnes in March.

- Strong demand from China helped compensate for weak purchases from other countries. Palm oil shipments to India slid 65.8% MoM in March while Pakistan bought 19.6% less palm oil. Demand from Egypt recovered 91.2% MoM in March 2013 after falling in 2012 due to the uprising and a change in government. Egypt accounted for 4% of Malaysia’s palm oil exports in 1Q2013.

- In conclusion, we are of the view that CPO prices would remain resilient underpinned by declining inventory levels. Hari Raya festivities would take place in July this year. This coupled with the Mooncake Festival in September would help support demand for palm oil.

Source: AmeSecurities