- Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for May 2014. Palm oil inventory in Malaysia continued to rise for the third consecutive month. It edged up by 4.2% from 1.77mil tonnes in April to 1.84mil tonnes in May on the back of expanding production and lower domestic disappearance.

- Palm oil inventory of 1.84mil tonnes was within consensus estimates of 1.83mil tonnes for the month of May. Average inventory level was 1.96mil tonnes last year. In the past two years, the highest level of palm oil inventory was 2.63mil tonnes recorded in December 2012 while the lowest level was 1.65mil tonnes achieved in June 2013.

- Domestic disappearance of palm oil eased from 209,000 tonnes in April to177,800 tonnes in May. In the five months of the year, domestic disappearance amounted to almost one million tonnes. Based on just five months’ of data, this would be about 5% of the country’s estimated palm oil production of 19.5mil tonnes for the full year.

- CPO production in Malaysia expanded by 6.5% from 1.56mil tonnes in April to 1.66mil tonnes in May. Palm oil output in Peninsular Malaysia improved 7.6% MoM in May while Sabah achieved a production growth of 6.3%. CPO output in Peninsular Malaysia strengthened 3.7% from 262,366 tonnes in April to 272,040 tonnes in May.

- Industry players have said that palm oil production would rise in 3Q2014 in line with seasonal trends. However, productivity may be soft in July due to the Ramadan festive period.

- Peninsular Malaysia recorded the highest increase in the level of palm oil inventory in May. Inventory of processed palm oil in Peninsular Malaysia climbed 18.6% MoM to 495,929 tonnes in May while Sabah chalked up an 8.8% rise. Inventory of processed palm oil in Sarawak edged up from 111,624 tonnes in April to 112,446 tonnes in May.

- Palm oil exports from Malaysia improved by 10.7% MoM to 1.4mil tonnes in May versus a 6.5% expansion in production. In the five months of the year, Malaysia exported 6.6mil tonnes of palm oil, 10.7% lower than the same period last year.

- The MoM growth in demand in May was underpinned by European Union, which bought 64.1% more palm oil. This was offset by China, which imported 12.8% fewer palm oil from Malaysia.

- In spite of this, China remained the largest importer of Malaysian palm oil, accounting for 18.4% of the country’s exports from January to May 2014. This was followed by India (13.8%), Netherlands (9.3%) and Pakistan (5.3%).

- So far this year, China has been buying more soybean compared with palm oil. According to the country’s Customs General Administration, China imported 41.3% more soybean in the four months of the year compared with the same period last year. In contrast, the country’s imports of palm oil declined 0.7% YoY.

- Biodiesel exports rose from 6,317 tonnes in April to 8,543 tonnes in May. From January to May 2014, biodiesel exports amounted to 30,828 tonnes, which were 47.7% lower YoY. We believe that most of Malaysia’s biodiesel products are exported to Europe, which has imposed anti-dumping duties on biodiesel from Indonesia.

Source: AmeSecurities