KUCHING (Aug 11): Malaysia’s crude palm oil (CPO) output surged to 1.6 million tonnes in July, and remained steady on year-to-date basis at 9.7 million tonnes.
The nation’s average fresh fruit bunch (FFB) yield rose by 7 per cent year on year (y-o-y) to 1.4 tonnes per ha — in tandem with improved production levels in the east states which had grew by 12.7 per cent y-o-y.
This was in spite of overhead extraction rates (OER) being relatively lower at 19.5 per cent due to slowed harvesting activities during uneven weather months.
“Overall, performance was well supported by Sabah and Sarawak output (which accounts 46 per cent of total nation’s production), since the states are less impacted by Southwest monsoon which begun in May to September,” commented analysts with MIDF Amanah Investment Bank Bhd (MIDF Research) in a note.
“Palm oil exports inched higher to 1.4 million tonnes during the month over concerns Russia-Ukraine conflict development.”
Overall, MIDF Research saw that CPO, palm kernel oil (PKO), palm kernel cake (PKC), oleochemical and biodiesel demand increased by 15.6, 20.1, 46.1, two and 30 per cent respectively following panic restocking activities by the refiners given uncertainty supplies from the Black Sea, benefitting from wider spread against soybean oil of US$257.2 per metric tonne.
Meanwhile, CPO inventory level remained high as closing stockpiles in July was down at 1.7 million tonnes, in tandem with steady CPO supply condition.
Both stocks, CPO and processed palm oil were down 2.5 and 2.3 per cent y-o-y respectively, due to lower contribution from Peninsular (minus 20.2 per cent y-o-y) whilst Sabah (rise of 32.5 per cent y-o-y) and Sarawak (minus one per cent y-o-y) areas remained steady.
“We believe the Malaysian PO stockpiles to continue recovering to pre-pandemic level thanks to the improved estates activities since labour shortage has now been 80 per cent resolved.
“CPO prices to trend lower. In July, the local CPO delivery price ended at RM3,802 per tonne with averaged monthly higher of RM3,897 per tonne following continuation uptrend of other vegetable oil’s prices.
“We are actually estimate July’s price to fall by 7.5 per cent or to RM3,260 per tonne level, but it appears that Russia-Ukraine was surprised development have cushioned the blow.
“Moving onwards, we forecast that average local CPO delivery prices would close lower by 19.6 per cent m-o-m to RM3,134 per tonne in August, or decline by 19.1 per cent q-o-q to RM3,112 per tonne in 3Q23 as a result of the peak crop seasonality amidst normalisation demand on the back of concerns on war subsidising.”