PT Astra Agro Lestari Tbk: Palm Oil Stocks to Grow 4.6% Monthly to 1.59 Million Tons by End of March, Says CGS CIMB Research

KUALA LUMPUR: CGS-CIMB Research expects palm oil stocks to increase by 4.6% month-on-month (mom) to 1.59 million tonnes by the end of March 2022, with a production and exports up 15% and 6% month-on-month, respectively .

The research house predicted that Crude Palm Oil (CPO) prices would trade in a wide range of RM6,000-7,500 per tonne in March 2022 due to uncertainties over the availability of oil crops. solar power from Russia and Ukraine.

The company said Indonesia’s decision to increase its Domestic Market Obligation (DMO) percentage to 30%, up 10% from the previous term effective March 10, 2022, will also have a impact on price.

“Indonesia’s decision to further restrict palm oil exports will tighten the availability of palm oil in the export market, as exporters may need time to fully comply with the new export decision. which we believe took the industry by surprise.

“This could keep prices high at the current level of RM7,410 per ton until the Ramadhan festival in May in the short term, before falling in the second half of 2022 (2H22),” he said.

CGS CIMB Research said Malaysia’s palm oil stocks fell 2% month-on-month but rose 16% year-on-year (YoY) to 1.52 million tonnes in February 2022 due to of a drop in production.

The company said the inventory level was 19% higher than its forecast of 1.27 million tonnes (as per the inventory overview note dated March 3, 2022) and 10-16% above estimates from the Bloomberg and Reuters poll consensus of 1.31-1.38 million tonnes due to lower-than-expected exports.

“The decline in exports could be due to timing issues and early signals of demand rationing due to the sharp increase in the local price of CPO since Russia’s invasion of Ukraine in February 2022.

“Inventory levels remain tight at 26% below February’s historic 10-year average inventory level of 2.06 million tonnes.

“We maintain a neutral rating on the sector, and our top picks in Malaysia are Kuala Lumpur Kepong Bhd, Genting Plantations Bhd and Hap Seng Plantations Holdings Bhd,” he added.

source: New Straits Times


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Felix J. Dixon