KUALA LUMPUR, Feb 7 — CGS-CIMB Securities Sdn Bhd expects Malaysia’s palm oil stock to rise 3.0 per cent month-on-month (m-o-m) to 2.26 million tonnes at end-January 2023 as production and imports exceeded exports and local usage.

In a note, the securities firm said findings from a survey of planters by the CGS-CIMB Futures team revealed that Malaysia’s crude palm oil (CPO) output likely fell 14 per cent m-o-m, but grew 12 per cent year-on-year (y-o-y) to 1.4 million tonnes in January 2023.

"The m-o-m decline in production was due to seasonality. January and February have historically been the low production months for Malaysian palm oil.

"Malaysian palm oil exports likely fell 27 per cent m-o-m and 7.0 y-o-y to 1.1 million tonnes in January, based on export statistics by cargo surveyors Intertek (-27 per cent m-o-m), SGS (-26 per cent) and Amspec Malaysia (-27 per cent mom) likely due to high stockpiles in India and China,” it said.

CGS-CIMB Securities said its estimate of 2.26 milliom tonnes for the January 2023 palm oil inventory level in Malaysia is 11 per cent above the 10-year historical January average of 2.03 million tonnes.

Official figures will be released on February 10, it said.

On prices, the firm said the spot CPO prices fell 11 per cent from RM4,165 per tonne on January 3 to RM3,691 per tonne on February 2 amid concerns over a possible slowdown in imports of edible oils by India in the coming months due to high vegetable oil stocks in the country.

"We are of the view that the downside to CPO price may be limited in the near term as Indonesia said on Feb 6 that it may suspend some palm oil export permits to secure domestic supply amid rising cooking oil prices ahead of the Lebaran festival.

"On top of this, Indonesia plans to raise its biodiesel mandate to 35 per cent in February from 30 per cent previously,” it said.

CGS-CIMB Securities also expect some improvements in Malaysia’s palm oil exports after the United States Customs and Border Protection (US CBP) last week revoked the Withhold Release Order (WRO) against Sime Darby Plantation.

However, it believed there could be downside to CPO price in the second half of this year due to improved palm oil supplies, with the Malaysian government having eased conditions for hiring foreign workers for the plantation sector on January 17.

"We expect CPO price to trade between RM3,700 and RM4,200 per tonne in February,” it said.

For the fourth quarter 2022 (4Q 2022) results season, it expects Malaysian planters to report weaker earnings, both quarter-on-quarter (q-o-q) and y-o-y due to lower CPO prices and rising costs.

Average CPO price fell 2.0 per cent q-o-q and 24 per cent y-o-y to RM3,910 per tonne in 4Q 2022, while cost of production has risen due to higher minimum wage since May 1, 2022 and higher fertiliser costs.

CGS-CIMB Securities has reiterated its ‘neutral’ call on planters as the sector lacks catalysts but is supported by a decent dividend yield of 3.0 per cent. — Bernama