A worker loads oil palm fruit into a lorry at a local palm plantation in Shah Alam outside Kuala Lumpur. - REUTERS
“We expect the news of higher stocks to be slightly negative for CPO prices,” it said.
CPO production rose by only 1% on-month in September, which was spot on with its forecast but below market expectation of 5% output growth. Muted CPO output continued to cap the rise in stocks during the peak production season from August to October.
“We expect palm oil supply to rise on-month in October but this would not be sufficient to cover the 2.27 million tonnes or 15% on-year drop in the nine months of 2016 output due to El Nino. We maintain our estimate for Malaysia palm oil supply to fall 10% on-year to 17.9 million tonnes in 2016,” itsaid
CIMB Research also explained palm oil exports fell 20% on-month in Sep to 1.45 million tonnes, due to weaker demand from China and India as traders have bought ahead of the Deepavali festival on fears of tight palm supplies.
In 9M16, palm oil exports fell 6% to 11.96 million tonnes as all major importing countries, with the exception of Pakistan, imported less palm oil from Malaysia.
“Our initial tentative estimates suggest that palm oil stocks will rise by 5% on-month in October 2016 to 1.63 million tonnes. We project that October production and exports will increase by 5% on-month. In the first 10 days of Oct, Malaysian palm oil exports rose 2%/10% against the same period in the previous month, according to SGS/ITS estimates.
“In view of the tight palm oil supplies, we expect CPO prices to trade in the range of RM2,400-RM2,700 per tonne in October and average RM2,450 per tonne in 2016 and RM2,600 in 2017,” it said.
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