This comes as palm oil inventories in Malaysia shrank more than expected last month as production slipped from a 10-month high level and exports saw a strong rebound, boosted by an increase in demand from all major consuming countries.
KUCHING (October 12): Higher demand from China, India and the European Union (EU) pushed up the crude palm oil (CPO) exports in September 2021 by 36.8 per cent month on month (m-o-m) to 1.60 million metric tonnes (MT) from 1.17 million MT in the previous month.
Specifically, demand from China rose by 70.5 per cent m-o-m, while India and the EU saw a 21.4 and 24.8 per cent rise m-o-m respectively.
Moving forward, the team with MIDF Amanah Investment Bank Bhd (MIDF Research) foresee higher export from India in October due to Diwali festival which is on 4th November 2021.
“On top of that, other factors such as removal of restriction on import of refined palm oil until the end of December will also help to boost the export demand from India,” it said in its palm oil review.
“Moreover, we believe that the large-scale Covid-19 vaccination rollouts worldwide will help to boost higher demand in the horeca (hotels, restaurants and cafés) sector, food manufacturing, oleochemicals as well as biofuels industries.”
This comes as palm oil inventories in Malaysia shrank more than expected last month as production slipped from a 10-month high level and exports saw a strong rebound, boosted by an increase in demand from all major consuming countries.
Meanwhile, CPO futures hit RM5,000 per metric tonne (MT) for the first time last week amid concerns over tight edible oil supplies and bullish demand ahead of the Diwali festival celebration.
“Nevertheless, we think current CPO price is toppish and the reopening of international borders could alleviate the worker shortage concerns,” commented analysts with Public Investment Bank Bhd (PublicInvest Research).
“Any build-up in inventory level in the subsequent months could exert pressure on the CPO prices.”
Price-wise, in September, MIDF Research noted that average CPO spot price increased by 0.3 per cent m-o-m to RM4,563 per MT from RM4,548.58 per MT in the previous month. On a year-on-year (y-o-y) basis, the average CPO spot price jumped by 55.8 per cent y-o-y from RM2928.07 in September 2020.
The highest CPO price recorded in September was on September 29, 2021, at RM4,663.50 per MT.
“We believe the palm oil supply tightness situation will likely remain at least until end of this year, given limited recovery of yield due to shortages of skilled harvesters, better demand outlook on the back of better economic activities locally and globally, as well as the upcoming La Nina weather phenomenon.
“On the demand front, we believe replenishment activities to import more palm oil will continue to be healthy bolstered by upbeat activities in the horeca segment in China and India.
“On another note, price-wise, we anticipate that the CPO price will remain favourable in 4Q21 supported by tight inventory supply in our local plantation industry. All factor considered we maintain our positive stance on plantation sector with 2021 CPO average price forecast of RM3,600 per MT.”