Malaysia’s palm oil inventory is expected to remain on an uptrend in the near term

Malaysia’s palm oil inventory is expected to remain on an uptrend in the near term, analysts said.

This was due to seasonally stronger output and lower exports to key importing countries in particular India and China.

They also expect palm oil production to rise in the near term.

Hong Leong Investment Bank Bhd (HLIB) said India had seen its edible oil inventory normalising since July while there was an absence of seasonal demand in China.

HLIB noted that Malaysia’s alm oil stockpile had ended marginally higher by 1.2 per cent month-on-month (MoM) at 1.73 million tonnes in September.

This came as higher exports were more than offset by marginally higher output (up 0.3 per cent MoM) and lower domestic consumption (-7.6 per cent).

The bank said year-to-date, crude palm oil (CPO) price had averaged at RM2,568 per tonne.

“Pending a further review on the sector, we keep our assumptions for now at RM2,350-2,400 per tonne in 2020-2021,” HLIB said in a report today.

The bank has maintained its “neutral” stance on the sector, with TSH Resources Bhd being its top pick with a traget price of RM1.14.

Public Investment Bank Bhd (PublicInvest) said the September inventory was the highest level in three months on the back of steady exports and a mild increase in production.

The slight gain in production was positive for the CPO prices as market expected stronger growth ahead of the high production season, Publicinvest added.

In view of the emergence of La Nina event, PublicInvest recently revised up its 2020 CPO price forecast from RM2,500 per tonne to RM2,600 per tonne.

The bank said CPO production growth had slowed down from 3.1 per cent to 0.3 per cent, registering 1.86 million tonnes in September compared to the market estimates of 1.96 million tonnes.

“The weaker-than-expected production provided support to the CPO prices. We expect to see continuous growth in production in the next two months before hitting the peak in October/November.

“However, the main concern is on worker shortages with a majority of plantation players experiencing a shortage of five per cent to 10 per cent following the government’s barring of foreign worker hire till this year-end,” PublicInvest added.