- Developments in the sector last week were in respect of MPOB’s (Malaysian Palm Oil Board) upcoming monthly statistics, Oil World’s report on biodiesel production and the retracement in soybean and CPO prices.

- IJM Plantations reported that its FFB production in Malaysia and Indonesia climbed by 9.1% MoM in August 2013. Another industry player had also indicated that its FFB output in August was between 8% and 10% MoM higher.

- Assuming an increase in palm oil production of 9%, an exports growth of 7% and domestic disappearance of 170,000 tonnes, we estimate the country’s palm oil inventory to be at 1.8mil tonnes for the month of August.

- If domestic disappearance comes out to 240,000 tonnes in August, which is the same as July, then palm oil inventory would be about 1.73mil tonnes.

- Consensus is forecasting a palm oil inventory level of 1.71mil tonnes. MPOB statistics is scheduled to be out on September 10.

- Bloomberg cited Oil World as saying that global biodiesel production will expand by 6.3% to 24.7mil tonnes in 2013F as producers direct more soybean oil towards fuel.

- Global soybean oil used for biodiesel production is estimated to rise 2.9% to 7.08mil tonnes in 2013F while palm oil usage for biodiesel is expected to rise by 11% to 6.34mil tonnes.

- Oil World said that conditions for biodiesel producers have improved due to the sharp decline in prices of vegetable oils. Also, the increase in mineral oil prices has promoted the demand for biodiesel.

- Last week (up to Thursday), soybean price slid 1.2% while CPO price retraced by 2.1% from its high of RM2,483/tonne on August 26. This was due to speculation that soybean harvesting will improve on the back of better weather conditions.

- A crop report showed that heat and dryness had less effect on soy crop conditions than market expectations. According to a US agency report, plant conditions across most of the eastern half of US were near normal or better than normal as of September 2.

- We are NEUTRAL on the plantation sector. Currently, we have a BUY on Genting Plantations for its special dividend payment and robust growth in FFB production underpinned by the operations in Indonesia.

Source: AmeSecurities