Malaysia’s Apr19 CPO production declined slightly by 1.4% mom to 1.65m MT. We believe production for the next 1-2 months is likely be affected by the Ramadhan and Hari Raya festivities. Palm-oil exports increased by 2% mom to 1.65m MT as key buyers such as China and India bought more of Malaysian palm-oil products in Apr19. The increase in exports and consumption contributed to the lower palmoil inventory in Apr19 of 2.73m MT, the lowest inventory level since Nov18. We still expect global palm oil inventory to decline gradually with higher exports and higher consumption of palm-oil products going forward, supported by the energy market and food industries, in our view. Overall, we maintain our Neutral rating on the plantation sector and Ta Ann as our top sector pick.

CPO Production in April Declined Slightly by 1.4% Mom to 1.65m MT

Malaysia’s CPO production in Apr19 dipped by 1.4% mom to 1.65m MT, after a high base of 1.67m MT in Mar19. CPO production in Peninsular Malaysia and Sabah declined by 0.2% and 8.7% mom to 924.8k MT and 414.2k MT respectively, while production in Sarawak increased by 6.3% mom to 310.2k MT. Production over the next 1-2 months could potentially be affected by the Ramadhan and Hari Raya festivities. Overall, Malaysia’s CPO production for 4M19 was up by 8.9% yoy to 6.6m MT, underpinned by improving FFB yields and CPO oil extraction rates. We expect the 2019 CPO production to rebound to c.20m MT from 19.5m MT in 2018 (Oil World forecast for Malaysia’s CPO production in 2019: 20.3m MT).

Stronger Palm-oil Exports to Key Buyers China and India

Palm-oil exports in Apr19 increased by 2% mom to 1.65m MT, due mainly to the top 2 key buyers China and India buying more of Malaysian palm-oil products. Exports to China and India climbed by 17.2% and 53.5% mom respectively, to 201k MT and 524.1k MT. The higher palm-oil exports in April could partly be attributable to stocking up ahead of Ramadhan, which falls mainly in May19. For 4M19, total exports rose 7.9% yoy to 6.3m MT.

Stock Level Declines for the Second Month to 2.73m MT

Malaysia’s palm-oil inventories in Apr19 declined for the second consecutive month by c.193.5k MT mom (or -6.6%) to 2.73m MT (record high was in Dec18 at 3.2m MT). We believe the increase in palm-oil product exports and consumption has contributed to inventory levels declining to its lowest since Nov18.

Source: Affin Hwang Research - 13 May 2019