KUALA LUMPUR (July 11): Malaysian palm oil stockpiles for the month of July are seen to continue to rise, after a higher-than-expected stockpile as at end-June and surveyor statistics showing weakened exports in the first ten days of this month.

According to CGS-CIMB research estimates, palm oil stocks could rise 11% month-on-month to 2.42 tonnes at end-July, while production could grow 9% on month as harvesting activities pick up following the return of workers from the festive celebration.

Exports are projected to fall 5% on month, due to continued weak demand from key importing countries.

“According to cargo surveyor SGS/Intertek, palm oil exports in the first 10 days of July 2018 fell 24%/14% versus the first 10 days of Jun 2018. The weak demand could be due partly due to the weaker currencies of key importing countries like India and China,” its analyst Ivy Ng observed.

Ng expects crude palm oil (CPO) price to trade in the RM2,200 to RM2,400 per tonne range in July 2018.

“Key bearish factors are weak demand for palm oil, which could be due to the combination of high import duties on palm oil in India, stubbornly high palm oil stocks in Malaysia compared to a year ago and potentially higher palm oil supply in 2H18,” she added.

Hong Leong Investment Bank shared the same sentiment, maintaining its neutral stance on the sector.

“We believe the uptrend in palm oil inventory to sustain into July 2018, on the back of a seasonal uptrend in palm production and seasonally lower restocking activites post-Ramadhan month,” said Hong Leong Investment Bank research analyst Chye Wen Fei in a note released this morning.

Yesterday, official statistics showed Malaysia’s palm oil inventory as at end-June rose 0.83% to 2.19 million tonnes versus 2.17 million tonnes in May.

In a statement, the Malaysian Palm Oil Board (MPOB) said palm oil inventory comprises CPO and processed palm oil. It said the 166.24% surge in total palm oil imports was mainly due to higher purchases of processed palm oil.

This is the first time palm oil inventory rose since December 2017, resulting from weaker exports and higher imports which outpaced lower production.