KUALA LUMPUR: Crude palm oil (CPO) prices may stay put despite a 5.72% increase in CPO stock to 1.37 tonnes last month from 1.3 million tonnes in April, as year-to-date production was still 4% lower than in the previous year.

“It would be natural for palm oil inventory in May to go up after falling consecutively the past five months. We reckon that CPO prices would sustain, underpinned by unfavourable weather, which could affect output in coming months, rising crude oil and soybean oil price and a weak US dollar,” AmResearch said in a report yesterday.

It said the average CPO price was RM2,743 per tonne in May compared with RM2,387 in April. It estimated a price discount between CPO and soybean oil at 18.2% currently versus an average of 12.5% in April.

China was the main importer of Malaysian palm oil in May, increasing its imports by 23% month-on-month to 319,097 tonnes, the research house said, adding that the increase in exports to China helped compensate for the decline in exports to Pakistan, India and the European Union.

CPO for August delivery rose 1.5%, or RM36, to close at the day’s high of RM2,501 yesterday. Soybean oil for July delivery rose 0.8% to 39.76 sen a pound.

Plantation counters closed mixed yesterday. Kulim (M) Bhd added 10 sen to RM6.55, IOI Corporation Bhd gained four sen to RM4.70, while Asiatic Development Bhd and Sime Darby Bhd rose five sen each to RM5.75 and RM7.05, respectively.

Batu Kawan Bhd eased five sen to RM8.95 while Kuala Lumpur Kepong Bhd, Far East Holdings Bhd and IJM Plantation Bhd were unchanged at RM12, RM6.10 and RM2.72, respectively.

Reuters reported that the increase in palm oil stock beat market expectations for a 2.3% drop to 1.26 million tonnes in the newswire’s poll this week.
 
Plantation officials had earlier said domestic consumption would have been 200,000 tonnes to 220,000 tonnes in May as hypermarkets and refiners stockpiled palm-based cooking oil in time for the Muslim fasting month of Ramadan in August.

According to industry regulator Malaysian Palm Oil Board (MPOB), May palm oil output declined 4.2% to 1.4 million tonnes year-on-year while exports last month rose 1.7% to 1,200,490 tonnes.

This article appeared in The Edge Financial Daily, June 11, 2009.