Malaysia’s palm oil stocks are projected to climb to 2.0 million tonnes by the end of August, up 13.5 per cent, as neighbouring Indonesia flushes out its bloated inventory ahead of peak production months, according to research houses.
CGS-CIMB said the August level reflected increasing competition from Indonesian exports, but was still below its forecast because Indonesian producers may have delayed shipments while waiting for a lower export tax.
The alarm is price. Malaysian crude palm oil has dropped 44 per cent in seven weeks, a steeper slide than those recorded in soybean and in crude oil, and CGS-CIMB argued the selling may have been slightly overdone given how far and how fast the market had fallen.
Indonesia has raised its domestic market obligation to a ratio of 1:9 from 1:7, and cut its crude palm oil export duty to US$52 per tonne, down from US$288, research notes said. Its CPO reference price was also reduced, to US$872.27, or RM3,879, per tonne.
In July, stockpiles hit 1.77 million tonnes, the highest level in eight months, up seven per cent on the prior month and 18 per cent from a year earlier, CGS-CIMB said.
With Jakarta’s cheaper exports weighing on prices, the analysts said Malaysian crude palm oil could trade in a range of RM4,000 to RM5,000 per tonne during August, and warned it could weaken further if the flood of Indonesian supply continues.
Looking further ahead, the research house said global vegetable oil supplies could ease by end-2022, particularly if Ukraine can ship oilseed products under the grains deal agreement signed, making 2023 a better year. Demand, it added, has turned more favourable as palm oil’s price edge widened.
Sources
- Research houses: Competition in crude palm oil market to remain stiff in near term – MPOC
- MPOB: Malaysia’s palm oil stocks climb 7.5pc to 2.82 million tonnes in August | Malay Mail
