Periodic/Sector reports
Plantation - Export Surge Slows The Stock Build
Highlights
MPOB's Oct 26 data showed Malaysia’s palm oil stocks rising 3.2% mom to a fresh record of 3.62m tonnes, below the 3.75m-tonne Reuters poll median. Exports jumped 55.7% mom to 1.71m tonnes, the steepest monthly rise in our data, and offset record production of 2.15m tonnes.
We expect stocks to peak in November at 3.6m-3.8m tonnes and to decline from December as output turns seasonally lower.
Maintain OVERWEIGHT. Sector picks: SD Guthrie (BUY/Target: RM8.30), Genting Plantations (BUY/Target: RM7.42) and KL Kepong (BUY/Target: RM28.50).
Analysis
MPOB's Oct 26 data. Palm oil inventory rose 3.2% mom to 3.62m tonnes, a seventh straight build and a fresh record (+44.4% yoy). The 110,609-tonne increase was a sixth of September's build and left stocks about 130,000 tonnes below the 3.75m-tonne Reuters poll median. The stock/usage ratio eased to 1.75x from 2.37x.
Production rose 1.7% mom to 2.15m tonnes, a second straight monthly record (+5.4% yoy), at the lower end of the 1-5% rise in our survey and below the Reuters poll's 2.20m tonnes. Sabah led (+7.2% mom), while Sarawak (+0.5%) and Peninsular Malaysia (+0.1%) were flat. The national oil extraction rate rose 0.08ppt to 20.34%. 10M26 output of 16.90m tonnes was up 2.3% yoy.
Exports jumped 55.7% mom to 1.71m tonnes, the steepest monthly rise in our data back to 1992 and the highest volume since Oct 24. This beat both the 45.4% rise in cargo surveyor estimates and the Reuters poll's 1.60m tonnes, consistent with restocking after India's duty cut and ahead of Diwali. Crude and processed palm oil exports rose 54.5% and 56.3% mom respectively. 10M26 exports of 13.23m tonnes were 4.0% ahead yoy.
Imports fell 54.9% mom to 26,207 tonnes, implying domestic disappearance eased 6.7% mom to 360,629 tonnes. Stronger exports explain most of the gap to the Reuters poll.
Outlook. We expect stocks to peak in November at 3.6m-3.8m tonnes and to decline from December. November output has fallen in each of the past 10 years (median: -7% mom), and Southern Peninsular Palm Oil Millers’ Association (SPPOMA) estimates 1-5 November output fell 9.7%. Exports are the swing factor: holding October's pace would trim stocks, while the median 12% seasonal fall would lift them to about 3.8m tonnes. Confirmation point: stocks at or below 3.8m tonnes in MPOB's November data, due around 10 December.
Highlights
MPOB's Oct 26 data showed Malaysia’s palm oil stocks rising 3.2% mom to a fresh record of 3.62m tonnes, below the 3.75m-tonne Reuters poll median. Exports jumped 55.7% mom to 1.71m tonnes, the steepest monthly rise in our data, and offset record production of 2.15m tonnes.
We expect stocks to peak in November at 3.6m-3.8m tonnes and to decline from December as output turns seasonally lower.
Maintain OVERWEIGHT. Sector picks: SD Guthrie (BUY/Target: RM8.30), Genting Plantations (BUY/Target: RM7.42) and KL Kepong (BUY/Target: RM28.50).
Analysis
MPOB's Oct 26 data. Palm oil inventory rose 3.2% mom to 3.62m tonnes, a seventh straight build and a fresh record (+44.4% yoy). The 110,609-tonne increase was a sixth of September's build and left stocks about 130,000 tonnes below the 3.75m-tonne Reuters poll median. The stock/usage ratio eased to 1.75x from 2.37x.
Production rose 1.7% mom to 2.15m tonnes, a second straight monthly record (+5.4% yoy), at the lower end of the 1-5% rise in our survey and below the Reuters poll's 2.20m tonnes. Sabah led (+7.2% mom), while Sarawak (+0.5%) and Peninsular Malaysia (+0.1%) were flat. The national oil extraction rate rose 0.08ppt to 20.34%. 10M26 output of 16.90m tonnes was up 2.3% yoy.
Exports jumped 55.7% mom to 1.71m tonnes, the steepest monthly rise in our data back to 1992 and the highest volume since Oct 24. This beat both the 45.4% rise in cargo surveyor estimates and the Reuters poll's 1.60m tonnes, consistent with restocking after India's duty cut and ahead of Diwali. Crude and processed palm oil exports rose 54.5% and 56.3% mom respectively. 10M26 exports of 13.23m tonnes were 4.0% ahead yoy.
Imports fell 54.9% mom to 26,207 tonnes, implying domestic disappearance eased 6.7% mom to 360,629 tonnes. Stronger exports explain most of the gap to the Reuters poll.
Outlook. We expect stocks to peak in November at 3.6m-3.8m tonnes and to decline from December. November output has fallen in each of the past 10 years (median: -7% mom), and Southern Peninsular Palm Oil Millers’ Association (SPPOMA) estimates 1-5 November output fell 9.7%. Exports are the swing factor: holding October's pace would trim stocks, while the median 12% seasonal fall would lift them to about 3.8m tonnes. Confirmation point: stocks at or below 3.8m tonnes in MPOB's November data, due around 10 December.
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