Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Agribusiness
Prices falling on expectation of higher stocks

Malaysian palm oil stocks rose 9% mom to 1.66m tonnes as at end-Jun 2022
due to higher output and lower exports — within expectations.

We project palm oil stocks to rise by 21.4% mom to 2m tonnes by end-Jul
2022F due to increasing competition from Indonesian exports.

We expect pure upstream Malaysian planters to post flat to higher sequential
profits in 2Q22F while those with Indonesia exposure may see weaker profits.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 5FE1EEE093

[winston]

Indonesia freezes workers for Malaysia

Indonesia has temporarily stopped sending its citizens to work in Malaysia.

This is because Malaysia continues to use the MOS system for recruitment.

This is negative for Malaysia and, in particular, the palm oil industry, which is
heavily reliant on Indonesian workers to ease the labour shortage issue.

Malaysia palm oil output will be below forecast in 2H22F if this issue is not
resolved. Negative for Malaysian planters and market due to earnings risks.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... E5E470D4E4

[winston]

Plantation – Regional
Temporary Suspension Of Indonesia’s Export Levy

Indonesia has announced the temporary suspension of the palm oil export levy from 15 Jul 22 to 31 Aug 22 to boost exports and increase domestic prices.

The latest GAPKI press release showed that Indonesia’s palm oil inventory hit 7.2m tonnes (+75% or +3.1m tonnes ytd) as at end May 22.

Suspension of the export levy will immediately increase the domestic CPO and FFB prices to ease smallholder’s pressure where some have incurred losses over the last two months. Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 78274e7238

[winston]

Regional Plantations
Desperate situation requires immediate adaptation
A normalization of inventory still 2 months away

The Indonesian (ID) government announced a USD200/t export levy waiver with immediate effect till end-August in its bid to stimulate exports given bloated domestic inventories.

While a step in the right direction (as we suggested last week), we maintain our view that it may still take at least 2 months for inventories to normalize as ID is now entering its seasonal peak production cycle in 2H.

Nonetheless, the price gap between MY and ID has quickly narrowed last Thursday to reflect ID’s revised export taxes.

Stay NEUTRAL. Our preferred BUYs are IOI and KLK.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/270007.pdf

[winston]

GODREJ'S DORAB MISTRY SPEAKS IN BLOOMBERG TV INTERVIEW*

*PALM OIL PRICES HAVE NOT FOUND A BOTTOM: ANALYST MISTRY

*PALM PRICES TO ONLY HIT BOTTOM ON UKRAINE WAR CEASEFIRE: MISTRY

*PALM OIL STOCKPILES IN INDONESIA ESTIMATED AT 10M TONS: MISTRY

*INDONESIA SHOULD EXTEND EXPORT LEVY EXEMPTION: MISTRY

*FOOD INFLATION PRICES HAVE PEAKED MAY-JUNE: MISTRY

*PALM OIL PRICES MAY SLUMP TO 3,000 RGT/T BY SEPTEMBER: MISTRY

*PALM MAY DROP TO 2,500-3,000 RGT WHEN UKRAINE WAR ENDS: MISTRY

[winston]

Malaysia labour crunch cost palm oil sector $2 bln between Jan-May - Reuters News

KUALA LUMPUR, July 19 (Reuters) - Malaysia is losing around 57,880 tonnes of palm oil fruit each day due to an acute shortage of labour, the commodities ministry said on Tuesday, costing the world's second-biggest producer more than $2 billion in the first five months of the year.

The Southeast Asian nation has grappled with worsening labour shortages throughout the pandemic, and efforts to bring in migrant workers from Indonesia and Bangladesh have stalled amid negotiations over measures to protect workers.

"Although the country's borders have reopened, the entry of foreign workers into the palm oil sector has not fully recovered," minister Zuraida Kamaruddin told parliament.

Migrant workers make up more than 75% of the workforce in plantation estates and staff shortages have throttled palm oil production in Malaysia amid a global edible oil shortage.

During the January-May period, planters faced an average shortage of around 54,190 workers, with more than 50% of this total, or nearly 29,000 workers, supposed to be doing the critical harvesting and collection tasks, Zuraida said.

Her estimates were lower than those of plantation industry groups, which in recent months said they were short of as many as 120,000 workers. (Full Story) (Full Story)

Zuraida said based on the ministry's calculations, an estimated 57,880 tonnes of palm fruit went unharvested per day, or 1.5 million tonnes per month.

As a result, Malaysia had lost 7.52 million tonnes of palm oil fruit from January to May, valued at 10.46 billion ringgit ($2.35 billion), Zuraida added.

Source: Reuters

[winston]

Palm oil set to plunge 20% by September, top analyst predicts

by Anuradha Raghu & Sing Yee Ong

May extend its slide, tumbling more than 20% to RM3,000 a tonne by September,

There’s another six to eight months of “pain” in Indonesia before stockpiles ease to normal levels of 5-6 million tonnes.

Prices could slump to RM2,500-3,000 when the war ends.

Source: Bloomberg

https://www.theedgemarkets.com/article/ ... t-predicts

[winston]

Planters will likely post a mixed bag of results q-o-q, says HLIB

by Surin Murugiah

Upstream planters with significant exposure in Malaysia will likely post flat to higher sequential performance in the second quarter of 2022 (2Q22).

Planters with significant exposure to Indonesian estates will likely post weaker performance in 2Q22, due to export restrictions in Indonesia.

“Maintain our 2022-24 CPO (crude palm oil) price assumptions of RM5,500/4,500/3,800 per tonne, and 'overweight' stance on the sector.

Prefer integrated players such as Kuala Lumpur Kepong Bhd (buy; TP [target price]: RM26.54) and IOI Corp Bhd (buy; TP: RM4.36) over purer upstream players,” i

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/630774

[winston]

Plantation – Malaysia
Inventory Continues To Inch Up

Malaysia’s end-Jul 22 palm oil inventory came in lower than market expectation mainly due to strong exports (especially India).

We believe this was mainly driven by softening CPO prices, which resulted in a demand recovery.

Despite strong exports, we reckon that inventory would still remain high due to higher production and more palm oil imports from Indonesia.

Maintain MARKET WEIGHT. Top picks: IOI Corporation and Hap Seng Plantations.

Source: UOBKH

https://research.uobkayhian.com/content ... 897a1c26b4

[winston]

CPO slumps after price warning from analyst

A leading industry analyst warned that prices would plunge by more than 30% by the end of this year due to ample supply and weaker demand.

Malaysian palm oil prices will plunge to RM2,500 by the end of December, weighed down by improving production, demand destruction and a slowdown in major economies, leading analyst Dorab Mistry said.

Source: Reuters

https://www.thestar.com.my/business/bus ... om-analyst