- Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for July 2013. After falling in the past six months, palm oil inventory in Malaysia inched up by 1.0% from 1.65mil tonnes in June 2013 to 1.66mil tonnes in July 2013. This was in line with consensus estimates of 1.65mil tonnes.

- The marginal rise in palm oil inventory was due to a rebound in production in July. Palm oil output in Malaysia has recovered a month earlier than expected.

- In spite of weak exports in July, inventory levels did not surge. This was due to an increase in the domestic disappearance of palm oil.

- Domestic disappearance of palm oil climbed from an estimated 170,000 tonnes in June to 240,000 tonnes in July. B5 was implemented in Johor since end-July 2013. After Johor, B5 will be extended to the northern states of Peninsular Malaysia in October 2013. B5 will be implemented in the eastern states of Peninsular Malaysia with effect from January 2014 onwards.

- It was reported that the implementation of B5 in the central and southern regions of Peninsular Malaysia would absorb about 149,630 tonnes of palm oil per year.

- CPO inventory fell by 3.9% MoM in Peninsular Malaysia in July. In contrast, CPO inventory in Sarawak continued to rise in July, recording a MoM climb of 27.3%. Inventory of CPO in Sabah was relatively flat in July.

- Average CPO price was RM2,325/tonne in July 2013 versus RM2,387/tonne in June. CPO price averaged RM2,317/tonne in the first seven months of the year. Our CPO price assumption is RM2,400/tonne for 2013F.

- The recovery in CPO production was led by Sarawak, which recorded a 26.8% MoM expansion in July. CPO output rose by 18.3% MoM in Peninsular Malaysia while Sabah registered a 12.8% improvement.

- CPO production amounted to 10.1mil tonnes in the first seven months of the year, 5.9% higher than the 9.5mil tonnes recorded in the same period last year. For the full year, industry experts are forecasting Malaysia’s CPO output between 18.4mil and 19mil tonnes.

- Exports of palm oil stagnated MoM in July. However on a YoY basis, exports rose by 9.4% to 1.42mil tonnes in July. A 12.3% increase in exports to China helped compensate for lower demand from Pakistan and Netherlands in July.

- Exports of biodiesel continued to climb. Biodiesel exports expanded by 71% MoM to 33,336 tonnes in July. Yearto-date, biodiesel exports amounted to 105,928 tonnes. We believe that Malaysian biodiesel producers are taking advantage of the provisional anti-dumping duties imposed by the European Union on the Indonesian companies.

- We remain positive on the plantation sector for now. Currently, we have BUYs on Genting Plantations, IJM Plantations, TSH Resources and KL Kepong.

Source: AmeSecurities