PETALING JAYA: Palm oil stock levels will remain “tight” this year amid the labour shortage woes and disruptions from the Covid-19-led lockdowns in estates, say analysts.

       This is despite the higher June palm oil inventory released by the Malaysian Palm Oil Board (MPOB) yesterday. MPOB said palm oil stocks rose slightly by 2.82% to 1.61 million tonnes in June from 1.57 million tonnes in May.

       For the same period, crude palm oil (CPO) production was 2.21% higher at 1.60 million tonnes from 1.57 million tonnes previously.

       Palm oil exports in June rose 11.8% to 1.42 million tonnes against 1.27 million tonnes in May.

       CGS-CIMB Research in its recent palm oil stock preview was spot on in its forecast on the MPOB’s palm oil statistics for June 2021.

       Findings from a survey of palm oil areas by the CGS-CIMB Futures team revealed that the local CPO output was 1.60 million tonnes in June, which is 2% higher month-on-month (m-o-m) but a decline of 15% year-on-year (y-o-y).

       “Our survey revealed that oil palm estates in Sabah posted the strongest m-o-m production gains in June

       “However, the key concern is the continuous declining y-o-y output trend, which is likely due to the severe shortage of foreign workers.

       “The ageing trees due to slow replanting, slower new planting rates and lower fertiliser input may also have also contributed to the weaker supply, ” it added.

       As for the palm oil inventory, it estimated that it probably grew 3% m-o-m, but declined 15% y-o-y to 1.61 million tonnes as at end-June.

       “This is a departure from historical trends, where local palm oil stocks in June have declined by an average of 2.2% m-o-m over the past 10 years, ” CGS-CIMB Research pointed out.

       However, the palm oil stock level in Malaysia is projected to remain tight, said the research house, adding that “the figure is 15% below the historical average for June palm oil stock levels for the past 10 years which is 1.9 million tonnes”.

       Meanwhile, exports in June grew from stronger demand from China. “Palm oil is attracting good demand due to the wide price discount against soya oil, which was US$393 (RM1, 647) per tonne on July 1 versus the historical five-year average of about US$122 (RM511) per tonne, ” added the research house.

       However, this is partly offset by concerns of weaker demand due to the increase in new Covid-19 cases in some countries and affordability issues due to the current high edible oil prices.

       On prices, CGS-CIMB Research said the average CPO price fell 16% m-o-m, but grew 120% y-o-y to RM3, 831 per tonne in June. This is the first m-o-m decline this year, due to Indonesia’s move to cut its export levy and weaker competing edible oil prices.

       For this month, the research house has projected CPO prices to remain firm at RM3, 400- RM4, 000 per tonne amid the low global edible oil inventories, which will take time to rebuild, and the shortage of workers in Malaysia. “We still expect the CPO supply to recover in the coming months, but at a slower rate due to labour shortage woes, ” it added.

       Despite rising CPO prices, CGS-CIMB Research said local planters’ share prices were under pressure due to concerns over forced labour allegations.