CIMB Research sees CPO trading RM1,700 to RM2,000 in December

KUALA LUMPUR: CIMB Equities Research projects crude palm oil (CPO) prices to trade within the RM1,700 to RM2,000 per tonne range in December.

It said on Wednesday for the 4Q18 results season, it expects plantation companies to report weaker earnings on a year-on-year basis due to lower CPO prices. 

Average CPO selling prices fell 28% year-on-year to RM1,956 per tonne in October-November. However, on a quarter-on-quarter basis, some plantation companies may report better earnings if improvement in output trumped the impact of lower prices.

“The rising palm oil stockpile for November is suppressing the CPO price, though further downside could be capped by government initiatives to raise biodiesel usage. Historically, CPO prices tend to bottom when palm oil stocks peak as was the case in November 2015,” it said.

The research house said findings from a survey of plantation areas by the CIMB Futures team reveal that Malaysian CPO output likely fell 2% month-on-month to 1.92 million tonnes in November 2018. 
Palm oil exports likely fell 12% month-on-month, based on export statistics by SGS, ITS and Amspec Malaysia.

“Overall, we estimate Malaysian palm oil inventory likely grew 12% month-on-month to 3.06m tonnes as at end-November. The official figures will likely be released on Dec 10. The previous record stockpile was 2.91m tonne in Nov 2015,” it said.

CIMB Research said the projected 2% month-on-month fall in CPO output for November is lower than historical average month-on-month decline of 9% in November over the past 10 years. 

“Our survey revealed that estates in Sarawak posted the highest month-on-month production declines, followed by those in Peninsular Malaysia. Sabah estates posted 6.5% month-on-month increases in production.

“We estimate that Malaysian palm oil exports fell c.11.9% month-on-month in November 2018, based on estimates from cargo surveyors SGS (-13% month-on-month), ITS (-12.4% month-on-month) and Amspec Malaysia (-10.3% month-on-month). 

“We believe this was due to competition from Indonesian producers, which could have offered more competitive pricing to clear inventories,” it said.

 Based on Indonesian Palm Oil Association’s (GAPKI) statistics, palm oil inventory in Indonesia was at 4.4m tonnes at end-October 2018 vs. 4.6m tonnes at end-September 2018.

Analyst Reports , Plantations