CGS-CIMB Research, in its latest agribusiness report, pegged the average CPO price at RM3,700 per tonne this year, but there remain an upside potential as “the CPO price has averaged at RM4,150 per tonne in the first eight months of this year.”
By end-September, the palm oil stocks could rise 1% month-on-month (m-o-m) to 1.89 million tonnes, said the research house.
CGS-CIMB Research pointed out that palm oil exports fell 17% m-o-m and 26% year-on-year to 1.2 million tonnes in August, dragged by weaker demand from China, the European Union and the United States.
“We suspect the sharp drop in local exports could be due partly to subdued buying by traders in anticipation of an increase in production.
“Consumers are also importing more palm oil from Indonesia ahead of the US$73 (RM303) per tonne increase in palm oil export tax in Indonesia effective Sept 1.
“There were talks that India is likely to lower the effective import duty on edible oils by 5.5% points to 24.75% for crude palm oil, soya and sunflower oil as well as by 9.5% points to 31.75% for refined palm oil and soya oil,” it added.
Meanwhile, PublicInvest Research expected a potential downward pressure on the price of CPO in the near-term as production is likely to pick up in the next two months.Last month, local palm oil inventories rose to its all-time high in over a year due to the stronger-than-expected production level rising 11.8% m-o-m to 1.7 million tonnes.
The local stockpiles grew 25% m-o-m to 1.87 million tonnes, above market expectation of 1.74 million tonnes.
According to PublicInvest Research, this is the steepest inventory growth since October 2009 mainly driven by recovery in production and lower exports.
“We think that the supply outlook is improving after months of tight supply pressure as production is seen picking up in the next two months.
“We are maintaining a ‘neutral’ call on the sector while monitoring the rebalancing of the sector valuation,” the research house said in its report.
TA Securities said cargo surveyors AmSpec and Intertek expected palm oil exports for the first 10 days of September 2021 to fall by 50.5% and 57.0% to 555,000 and 572,000 tonnes respectively.
It has kept an “overweight” on the plantation sector with key downside risks including higher-than-expected rise in soybean production which could put downward pressure on the prices of other edible oils in the market.
Other risks included unfavourable government policies, weaker- than-expected demand in China and India as well as a delay in global economic recovery from the prolonged Covid-19 pandemic.