-  Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for August 2013. Malaysia’s palm oil inventory stood at 1.67mil tonnes as at end-August versus 1.66mil tonnes as at end-July. The palm oil inventory of 1.67mil tonnes was marginally below the consensus estimate of 1.71mil tonnes.

-  The MoM rise in inventory levels was due to a rebound in palm oil production. Although the Hari Raya festive period took place in August, productivity was still high.

-  Exports of palm oil also rebounded in August after stagnating in July. Domestic disappearance slid from 240,000 tonnes in July to 210,000 tonnes in August.

-  As has been reported, the implementation of the B5 biodiesel will be extended to the northern states of Peninsular Malaysia from October 2013. B5 will also be carried out in the eastern states from January 2014 before Sabah, Sarawak and Labuan by July 2014.

-  As such, B5 will be fully implemented in Malaysia by July 2014. It will absorb about 500,000 tonnes of palm oil from the system every year.

-  Inventory of CPO accounted for 60% of total palm oil inventory in Malaysia in August. Inventory of processed palm oil made up the balance 40%.

-  CPO inventory rose 16.1% MoM in Peninsular Malaysia and by 27.3% MoM in Sabah. However, CPO inventory in Sarawak finally declined, by 12.1% MoM. In spite of the climb in inventory of CPO, stocks of processed palm oil fell. Inventory of processed palm oil slid 8.7% MoM in August in Sabah while Peninsular Malaysia recorded a sharper fall of 22.6%.

-  Average CPO price was RM2,334/tonne in August 2013 compared with RM2,325/tonne in July. Average CPO price was RM2,319/tonne from January to August 2013. Our CPO price assumption is RM2,400/tonne for 2013F.

-  The recovery in CPO production was led by Sabah, which recorded an 8.9% MoM expansion in August. CPO output inched up 4.5% in Sarawak while palm oil production in Peninsular Malaysia was relatively unchanged.

-  Exports of palm oil improved 7.4% MoM to 1.52mil tonnes in August. The increase in demand was led by China, which bought 10.2% more palm oil and the Netherlands, which imported 47% more.

-  Exports of biodiesel are still trending up. Biodiesel exports amounted to 114,414 tonnes in the eight months to August, 502.7% YoY higher than the same period last year. Going forward, Malaysian exporters are expected to face competition from their Indonesian counterparts as the European Union has rescinded the anti-dumping duty on Indonesian biodiesel.

-  We are neutral on the plantation sector. CPO prices are expected to remain range-bound underpinned by low inventory levels and slowing production from November 2013 onwards. Currently, we have a BUY on Genting Plantations.

Source: AmeSecurities