Malaysia: Local palm oil stocks expected to drop 7pct in February
Malaysian palm oil stocks are expected to fall by another seven per cent month-on-month (MoM) to 1.48 million tonnes in February due to continued low production.
CIMB Securities said the low production is a result of fewer working days in February versus January.
It said the heavy rainfall experienced in January is also likely to persist in February.
Crude palm oil (CPO) production and palm oil exports are expected to drop by five per cent MoM to 1.18 million and 1.1 million tonnes, respectively, in February.
“The current CPO price premium over soybean oil remains high, which is likely to prompt consumers to switch to cheaper alternatives,” it said.
Malaysian closing palm oil stocks declined by 7.5 per cent MoM and 21.8 per cent year-on-year to 1.58 million tonnes in January, marking a 20-month low.
The firm said this decline was due to lower output, which more than offset higher imports and lower exports.
“The stock level was below our forecast of 1.73 million tonnes and consensus estimates of 1.65–1.66 million tonnes.
The firm added the newly introduced policies by the US could impact vegetable oil markets.
A 25 per cent import tariff on Canada could result in higher US vegetable oil prices, as Canada is currently the largest supplier of US vegetable oil imports and restrictions on the use of imported used cooking oil as biodiesel feedstock in the US may increase US reliance on vegetable oil imports, which could be positive for palm oil.
“As for Indonesia’s adoption of B40 biodiesel in the first quarter of 2025 (Q1 2025), the current high premium of palm oil over gas oil of US$430 per tonne could result in higher adoption costs, leading to potential implementation risks due to funding issues in Q4 2025,” it said.
The firm maintained its average CPO price forecast of RM4,200 per tonne for 2025 and project planters to report better earnings in Q4 2024, supported by higher CPO prices and increased production from Indonesia.
It kept its ‘Overweight’ call on the sector.
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