- Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for October 2014. Palm oil inventory in Malaysia edged up 3.7% from 2.09mil tonnes in September to 2.17mil tonnes in October. October’s inventory of 2.17mil tonnes was the highest level since March 2013.

- The rise in palm oil inventory was due to declines in domestic disappearance and palm oil exports. October’s palm oil inventory of 2.17mil tonnes was slightly above consensus estimates of 2.14mil tonnes.

- Domestic disappearance of palm oil amounted to 2.14mil tonnes in the first 10 months of the year compared with 1.4mil tonnes in the same period last year. Domestic disappearance contracted from 231,970 tonnes in September to 211,140 tonnes in October.

- Average price discount between soybean oil and palm oil was 13.5% in October against 16.7% in September. In the past five years, average price disparity between the two commodities was 14.1%. Average CPO price was RM2,453/tonne in the first 10 months of the year, which is close to our assumption of RM2,500/tonne for the full year.

- CPO production eased for the second time in October. CPO production in Malaysia slid 0.2% MoM to 1.89mil tonnes in October. Peninsular Malaysia recorded the sharpest MoM decline of 2.5% in palm oil production in October.

- CPO output in Sarawak contracted 2.2% from 355,908 tonnes in September to 348,023 tonnes in October while Sabah chalked up a MoM increase of 5.4%. As mentioned in a previous report, we think that the downward trend in CPO production is due to the lagged impact of the dry weather, which hit Peninsular Malaysia in 1Q2014.

- Inventory of palm oil in processed form climbed 6.6% from 911,933 tonnes in September to 971,869 tonnes in October. Inventory of processed palm oil in Sabah rose 14.4% MoM to 294,873 tonnes in October while Sarawak recorded a 5.7% expansion. Stockpiles of crude palm oil inched up 1.4% from 1.18mil tonnes in September to 1.19mil tonnes in October.

- Palm oil exports shrank 1.4% MoM to 1.6mil tonnes in October mainly due to a 40.5% fall in demand from India. Palm oil exports fell by 5.5% YoY in the first 10 months of the year compared with a 5.5% increase in palm oil production. The decline in demand can be attributed to China. Exports of palm oil from Malaysia to China contracted by 25.6% YoY in the first 10 months of the year.

- As a result, India has overtaken China as the largest buyer of Malaysian palm oil this year. Palm oil exports to India climbed 41.7% YoY in the period of January to October 2014.

- Biodiesel exports remained weak. In the first 10 months of the year, biodiesel exports amounted to 44,045 tonnes, 71.5% weaker than the same period last year. On a monthly basis, biodiesel exports improved from 150 tonnes in September to 1,642 tonnes in October. We believe that most of the biodiesel were exported by Felda Global Ventures.

Source: AmeSecurities