KUALA LUMPUR, Dec 13 ― The average local crude palm oil (CPO) delivery price is forecast to close 0.4 per cent month-on-month lower to RM3,684 per tonne in December from RM3,700.5 per tonne in November due to the abundance of year-end stocks, said MIDF Research.

In a note today, it said Malaysia’s CPO production stayed at 1.8 million tonnes in November as estate activities had increased with newly hired foreign workers, particularly in the Peninsular, and no strong El Nino appearance.

Palm oil exports remained weak at 1.4 million tonnes in November due to high inventories in major importing countries, as stockpiles of palm oil derivatives stood at 2.4 million tonnes in November.

“The abundant stockpiles of palm oil derivatives indicate that demand for cooking oils, particularly trans-free fats such as margarine, shortening and vegetable ghee or food products were softer.

“This has been reflected in recent quarter results, where integrated companies like Kuala Lumpur Kepong Bhd, IOI Corporation Bhd, and FGV Holdings Bhd downstream arm (oleo plant and refinery) have -1.6 per cent to merely +0.7 per cent profit margin,” it said.

Thus, MIDF Research maintained a neutral call on the sector with an average CPO price forecast of RM3,800 per tonne and RM3,600 per tonne for 2023-2024, respectively.

Meanwhile, Hong Leong Investment Bank Bhd said stockpiles will likely remain flattish in December, as seasonally low production which started in November will be offset by weak near-term demand sentiment from China and price competition from other competing oils.

“We maintain 2023-2024 CPO price assumptions of RM3,850 per tonne and RM4,000 per tonne respectively, as we expect El Nino’s impact on palm production and prices to kick in around mid-2024.

“We also maintain a neutral call on the sector, given the absence of notable demand catalyst,” it said.

Similarly, Kenanga Investment Bank Bhd maintained its neutral call for the sector and projects flattish CPO prices of RM3,800 per tonne in 2024, with demand growth normalising at 3.0-4.0 per cent year-on-year and supply looking to stay tight.

It noted that production cost has been easing since mid-2023 and should stay soft into 2024.

“El Nino has been mild so far, but ageing trees are now expected to dampen palm oil yields instead. Given firm CPO prices with softer cost outlook, the sector’s 2024 profit should recover,” it said. ― Bernama