Malaysian crude palm oil prices to stay firm on likely drop in March palm stocks: CIMB

04.04.2017

Palm oil inventories in Malaysia were estimated to have fallen by 2% month on month to 1.43 million mt at the end of March as export growth outstripped the rise in production, and that combined with other factors are expected to support CPO prices in the near term, Malaysia's CIMB Bank said in a note late Monday.

The front-month CPO futures contract on the Bursa Malaysia exchange stood at MR2,842/mt, or $641.90/mt, on Monday at the S&P Global Platts 0830 GMT Asian market close.

A survey by CIMB of 24 Malaysian plantations revealed that the country's CPO output grew 5% month on month in March to 1.33 million mt, while palm oil exports rose by around 7% over the same period to 1.19 million mt from 1.11 million mt, based on export data from cargo inspectors SGS and ITS, said the note.

The 5% rise in March CPO production was lower than the 15% historical average for March over the past five years.

The smaller rise in production was attributed to flooding in palm estates, lack of labor for harvesting the palm fruit on time and uneven growth in production across palm estates in different regions of Malaysia, with Peninsular Malaysia and Sarawak showing weaker growth than Sabah, said the note.

Palm oil exports, especially to India, Pakistan and the EU were reported to have risen, based on ITS and SGS data, added the note. However, the 7% projected rise is lower than the 8% rise predicted by CIMB earlier.

Meanwhile, CPO prices may be pressurized by lower soybean prices, since the latest USDA planting report released last Friday showed that US farmers plan to plant record high acreage of soybeans at 89.5 million acres.

This could lead to higher supply of soybean oil, which would then push palm oil prices down, added the note.


platts

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