-  Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for August 2014. Palm oil inventory in Malaysia climbed 21.9% from 1.68mil tonnes in July to 2.05mil tonnes in August.

-  Driving the increase in palm oil inventory were a surge in production and fall in exports. Palm oil inventory of 2.05mil tonnes in August was above consensus estimates of 1.95mil tonnes. As mentioned in previous reports, average inventory level in Malaysia was 1.96mil tonnes in 2013. Six-year average was 1.87mil tonnes.

-  Domestic disappearance of palm oil rose from 194,070 tonnes in July to 225,030 tonnes in August. From January to August 2014, domestic disappearance of palm oil amounted to 1.69mil tonnes. In the same period last year, domestic disappearance totalled 975,084 tonnes.

-  Based on current prices, the discount between palm oil and soybean oil is US$59/tonne or 8.6% compared with the five-year average of 15% and average of 18.5% in 2013. Year-to-date, average CPO price is RM2,512/tonne versus our assumption of RM2,500/tonne for the full year.

-  CPO production in Malaysia expanded 22.0% from 1.67mil tonnes in July to 2.03mil tonnes in August. The increase in palm oil production is expected to continue until September or October. In the eight months of the year, CPO output amounted to 12.8mil tonnes, 8.1% YoY higher. MPOB has forecast the country’s CPO production at 19.5mil tonnes for 2014F (2013: 19.2mil tonnes).

-  The growth in palm oil production was led by Sarawak, which recorded a 31.1% MoM increase in August. CPO output in Sabah expanded 21.9% from 456,459 tonnes in July to 556,614 tonnes in August while Peninsular Malaysia achieved a 19.1% improvement.

-  Inventory of palm oil in crude form rose 26.7% from 895,352 tonnes in July to 1.1mil tonnes in August while inventory of palm oil in processed form jumped by 16.6%.

-  Sarawak recorded a surge in processed palm oil inventory of 71.5% MoM in August. As for inventory of palm oil in crude form, Peninsular Malaysia achieved a 32.9% increase while Sabah chalked up a 16.8% expansion.

-  We reckon that some upstream players would be exporting crude palm oil in September and October due to the zero export tax, which was set by the Malaysian government last week.

-  Palm oil exports edged down 0.4% MoM to 1.44mil tonnes in August. For the first eight months of the year, palm oil exports amounted to 11.0mil tonnes, 6.7% YoY lower.

-  The fall in exports was due to China, which bought 23.2% fewer palm oil this year. This was partly compensated by Netherlands, which recorded an 8.1% YoY expansion in palm oil imports.

-  Biodiesel exports plunged from 3,610 tonnes in July to 90 tonnes in August. Biodiesel exports amounted to 42,253 tonnes from January to August 2014 compared with 125,644 tonnes in the same period last year.

Source: AmeSecurities