KUCHING: Malaysian Palm Oil Board’s (MPOB) November 2015 palm oil data was broadly negative while production contraction was larger than expected and exports continue to disappoints.
TA Securities Holdings Bhd’s research arm (TA Research) noted that crude palm oil (CPO) production declined to 1.65 million tonnes.
The sharp drop was mostly attributable to lower yield across Peninsular Malaysia, Sabah as well as Sarawak.
Nonetheless, the low production was not enough to arrest the expansion in inventory due to, weak export, lower domestic demand and, large import.
As a result, month-end stocks surged to a new record high at 2.9 million tonnes vs consensus expectations that it will remain flattish at 2.8 million tonnes.
Export seems particularly disappointing noted the research house, since demand is traditionally stronger in November as some countries stocks up ahead of the low production season.
“All major exports market showed on month decline in the range of 2.1 per cent to 43.5 per cent.
“Total exports amounted to 1.5 million tonnes. The decline was mainly driven by India, which accounted for 21 per cent of year to date’s total market share.
“We suspect the decline was mainly due to destocking after the huge purchases in the previous months. Export to China remained weak at 160,000 tonnes in November. Year to date, exports only grew by one per cent on year to 15.9 million tonnes,” said TA Research.
Meanwhile, the current El Nino is near its peak intensity and is showing some signs of easing, although the agency added that the weakening may be shortlived.
The current El-Nino is likely to persist well into 2016. Sea surface temperatures in the Pacific Ocean remain at near record levels, indicating that 2015 El-Nino is likely to be one of the three strongest events in the last 50 years.
Earlier today, USDA in its December Supply and Demand Report indicates that soybeans stocks will remain unchanged domestically with 465 million bushels.
The reports reaffirmed that soybean supply will remain ample in the 2015/16.
“That said, this report has yet to take into account any potential soybean supply deterioration in South America, attributable to weather factor.
“It is still too early to gauge the effect but if any it will be the downside risk to production forecasts,” it added.