- Malaysian Palm Oil Board (MPOB) has released the country’s palm oil statistics for January 2015. Palm oil inventory in Malaysia slid 12.2% from 2.02mil tonnes in December 2014 to 1.77mil tonnes in January 2015. This was marginally above consensus estimates of 1.75mil tonnes.

 - The fall in inventory was due to continued weakness in palm oil production. CPO production fell by 15.0% MoM to 1.16mil tonnes in January 2015 while exports contracted by 22.1%.

 - Domestic disappearance of palm oil surged from 105,630 tonnes in December 2014 to 221,890 tonnes in January 2015. B7 has been fully implemented in the country and it is expected to absorb about 576,000 tonnes of palm oil from the system every year. Currently, MPOB is studying the feasibility of B10. B10 will be tested in trial runs of government vehicles owned by Kuala Lumpur City Hall and Alam Flora.

 - Average CPO price was RM2,294/tonne in January 2015, 7.0% higher than the average price of RM2,144/tonne achieved in the preceding month. The rise in CPO price was driven by the fall in production resulting from the floods in Peninsular Malaysia. Against soybean oil, CPO was 14.3% cheaper in January 2015 compared with 16.1% in December 2014. We have assumed an average CPO price of RM2,450/tonne in 2015F.

 - CPO output contracted by 15.0% MoM and 23.1% YoY to 1.16mil tonnes in January 2015. This was the fourth consecutive monthly decline. We believe that FFB yields were affected by the lagged impact of the dry weather, which took place in Peninsular Malaysia in early-2014. Also, some areas in Sabah were facing tree stress.

 - CPO production in Peninsular Malaysia fell by 9.5% MoM in January 2015 while Sabah registered a 18.1% slide in output. CPO production in Sarawak plunged by 21.8% from 266,403 tonnes in December 2014 to 208,233 tonnes in January 2015.

 - Inventory of palm oil in crude form eased by 11.5% from 995,691 tonnes in December 2014 to 881,303 tonnes in January 2015 while inventory of processed palm oil declined by 12.9%. In Sabah, CPO inventory fell by 14.8% MoM in January 2015 while Peninsular Malaysia recorded a 10.5% decrease. Stockpile of crude palm oil inventory in Sarawak edged down 2.5% from 126,550 tonnes in December 2014 to 123,344 tonnes in January 2015.

 - Palm oil exports fell by 22.1% from 1.5mil tonnes in December 2014 to 1.18mil tonnes in January 2015. Against January 2014, palm oil exports declined by 13.4%. Exports of palm oil to China shrank by 29.3% YoY in January 2015 while India’s imports eased by 15.4%. After stocking up ahead of the hike in import duties late last year, India’s palm oil purchases are softening.

 - China was the largest buyer of Malaysian palm oil in January 2015, accounting for 18.3% of the country’s exports. This was followed by India (13.0%), Netherlands (11.1%), USA (5.5%) and Pakistan (4.7%).

 - Biodiesel exports rebounded in January 2015. Biodiesel exports surged from 614 tonnes in December 2014 to 10,490 tonnes in January 2015. We think that the recovery is unlikely to sustain as fossil fuel is cheaper than biodiesel currently.

Source: AmeSecurities