Malaysia’s end-2021 palm oil stocks seen higher than 2020: Platts survey

Malaysia is expected to have ended December 2021 with crude palm oil stocks of around 1.73 million mt, a dip from end-November stock levels, but much stronger when compared with CPO inventory of 1.26 million mt a year ago, a S&P Global Platts survey showed.

December production from the world’s second largest palm oil exporter is projected to rise 12% year on year to 1.49 million mt, according to a median forecast by 13 analysts, traders, and producers.
The Platts survey also pegged December palm oil exports at a four-month low of 1.39 mil mt, as top buyers India and China made hand-to-mouth purchases to fulfil domestic requirements, market sources said.

Malaysia produced 1.64 million mt of CPO in November and exported 1.47 million mt of palm oil products, data from the Malaysian Palm Oil Board, or MPOB, showed.

MPOB will release official supply and demand data for December Jan. 10.

Malaysia’s local delivery CPO prices have risen by as much as 8% to over MR 5,000 ($1,192.32) since mid-December, according to MPOB data, as heavy rains and flooding hurt palm oil milling and harvesting in several states in Peninsular Malaysia.

“Weather risks premiums are trading higher as we transition further into lower production period till end-February, March,” Marcello Cultrera, sales manager and derivatives dealer at Phillip Futures said in a note Jan. 6.

The prices over the next couple of months will be driven by demand from the Middle East, due to Ramadan, and India, Cultrera said.

Palm oil’s narrowing price advantage over soft oils, such as soybean and sunflower, could be bearish for the market, trade sources told Platts.

The spread between FOB Argentine soybean oil and Malaysian palm olein narrowed to $3/mt, from $70/mt a week ago. The spread should widen by at least $50/mt to $60/mt for Malaysian olein to be competitive, according to Cultrera.

Palm, soybean, and sunflower oil compete for share in the global vegetable oils market.

Bullish news around Argentina’s moisture deficit, Malaysia’s adverse weather, high fertilizer costs, and upcoming Ramadan demand could be offset by narrow palm and soya spreads, and demand concerns due to the omicron coronavirus variant, Sandeep Singh of Kuala Lumpur-based commodities firm, The Farm Trade said.

Palm oil rally is likely to continue in the $1,000/mt range, but could be dampened by higher soybean oil output, the Council of Palm Oil Producing Countries, an international body of oil palm growers, said in its full year 2022 outlook.

Indian buyers will typically go for soybean oil if the price spread between crude palm oil and crude soybean oil is less than $80/mt, a source told Platts.

S&P Global Platts

Tags: prices, Crude palm oil, Production, Malaysia, stocks, sunflower oil, soybean oil