Malaysia's palm oil sector showed surprising dynamics as MPOB reported a tighter stockpile of 1.73 million tonnes at the end of July 2024, down 5% from June. Despite a strong production increase to 1.84 million tonnes (+14% month-on-month), exports surged to 1.69 million tonnes, leading to a lower-than-expected stockpile. Consumption and imports, however, were subdued, with a notable drop in July.
The preliminary export figures for August indicate a slow start, with estimates showing a decline of 12-18% month-on-month. If this trend continues, stockpiles could rise to 1.90 million tonnes by the end of August. Analysts expect a peak in stockpile build-up during the high production months from August to October.
In light of recent developments, analysts have raised their CPO price assumptions for 2024 and 2025. The average CPO spot price has performed better than anticipated due to tight supply in Indonesia and a weaker Malaysian ringgit, which has boosted prices in MYR terms.
Revised forecasts now set the average CPO price at MYR3,850 per tonne for 2024 and MYR3,700 per tonne for 2025. Despite this, CPO prices are expected to face seasonal pressures in the coming months.
The sector remains on a NEUTRAL stance, reflecting stable production and inventory levels. Analysts expect stock levels to exceed 2 million tonnes by the end of the year, with La Niña conditions potentially influencing future supply. Current top picks include IOI Corp, Sarawak Oil Palms, and PP London Sumatra Indonesia, reflecting strong performance despite the overall NEUTRAL rating for the sector.