CGS-CIMB: Palm oil stocks estimated to be 3pc higher in June 2021 but level remains tight

Based on a survey by the CGS-CIMB futures team, the country produced 1.6 million tonnes of crude palm oil (CPO) in June, up two per cent m-o-m which was stronger than the 10-year historical trend of a 0.3 per cent m-o-m contraction in output. — Picture by Shafwan Zaidon
Based on a survey by the CGS-CIMB futures team, the country produced 1.6 million tonnes of crude palm oil (CPO) in June, up two per cent m-o-m which was stronger than the 10-year historical trend of a 0.3 per cent m-o-m contraction in output. — Picture by Shafwan Zaidon

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KUALA LUMPUR, July 5 — Malaysia’s palm oil inventory is estimated to grow by three per cent month-on-month (m-o-m) to 1.61 million tonnes at end-June 2021 as lower local usage was offset by higher exports, according to CGS-CIMB Securities Sdn Bhd.

It said the increase marked a departure from historical trends, which had seen Malaysian palm oil stocks in June declining by an average of 2.2 per cent m-o-m over the past 10 years.

“Despite this, the palm oil stock level in Malaysia is projected to remain tight as it is 15 per cent below the historical average June palm oil stock levels for the past 10 years of 1.9 million tonnes,” it said in a research note today.

Based on a survey by the CGS-CIMB futures team, the country produced 1.6 million tonnes of crude palm oil (CPO) in June, up two per cent m-o-m which was stronger than the 10-year historical trend of a 0.3 per cent m-o-m contraction in output.

Average CPO price fell by 16 per cent m-o-m but grew 120 per cent year-on-year (y-o-y) to RM3,831 per tonne in June 2021.

On palm oil exports, CGS-CIMB said the volume likely rose by nine per cent m-o-m to 1.38 million tonnes due to stronger exports to China.

According to cargo surveyor Intertek Testing Services’ data, Malaysia’s exports for June rose by 7.06 per cent per cent m-o-m to 1.52 million tonnes from 1.42 million tonnes in the previous month.

Meanwhile, cargo surveyor Amspec Malaysia forecast that exports increased 8.6 per cent m-o-m to 1.55 million tonnes in June.

For July 2021, CGS-CIMB projected CPO prices to remain firm at RM3,400 to 4,000 per tonne amid low global edible oil inventories, which would take time to rebuild, and a worker shortage in Malaysia.

“We still expect CPO supply to recover in the coming months but at a slower rate due to labour shortage woes. Despite rising CPO prices, Malaysian planters’ share prices are under pressure due to concerns over forced labour allegations,” it said.

It noted that the recent cut in export levy by Indonesia was a slight negative as well.

CGS-CIMB retained its neutral call on the agribusiness sector. — Bernama

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