PETALING JAYA: Potential stockpiling activities from China and India as well as renewed purchasing from Muslim countries ahead of the Aidil Fitri festive season is expected to push the exports of local palm oil higher this month.
According to plantation analysts, palm oil exports are expected to rise by about 17.6% month-on-month (m-o-m) to 1.39 million tonnes in April.
Furthermore, the rise in the current exports trend seemed to emulate last year’s episode where China and India had to quickly replenish when their oils and fats stock levels plummeted to multi-year lows between April and May.
As of March this year, it is believed that the inventory level is even lower for both major edible oil importing countries. In 2020, India maintained its position as the largest Malaysian palm oil export market for the seventh year since 2014, with 2.75 million tonnes, followed by China at 2.73 million tonnes.
Kenanga Research analyst Adrian Kok pointed out that palm oil exports in March increased by 31.8% m-o-m ahead of Ramadan, predominantly driven by India, Kenya, Iran, Pakistan and Turkey.
Data from independent cargo surveyors for April 1-10 showed an average increase of 11%.
“We think exports to Muslim countries will continue to improve for the remainder of April, ahead of the Islamic festive season.
“Additionally, we think China and India could start replenishing their oils and fats inventories, ” Kok said in his latest plantation sector report.
Moving forward, the key factors to focus on in the coming months are stockpiling activities by India and China, labour situation as local plantations approach peak production season, supply-demand dynamics of soybean market, and the biodiesel mandates fullfilment.
In terms of production, Kenanga Research has forecast palm oil production to rise by 11.2% to 1.58 million tonnes in April.
“Our earlier belief has been confirmed by March’s production figures – the production downtrend in Sabah and Sarawak has reversed and we expect growth in the peninsula, Sabah and Sarawak to continue in April.
“Premised on these reasons, we forecast 11.2% m-o-m increase in overall production this month, ” he added.
In addition, April inventory is expected to climb by 5.5% to 1.53 million tonnes.
Kok said: “All in, we expect a total supply of 1.71 million tonnes to outstrip total demand of 1.63 million tonnes, leading to higher ending stocks of 1.53 million tonnes in April.”
Kenanga Research remained “neutral” on the plantation sector with an unchanged crude palm oil price forecast of RM3,000 per tonne.