KUALA LUMPUR (June 13): CIMB Investment Bank Bhd said Malaysian palm oil inventory could decline further in monthly terms this month due to adverse weather, worker shortage, and lower exports.

In a note, CIMB analyst Ivy Ng said the research firm expected June inventory to decline 5% to 1.57 million tonnes. Inventory comprises crude palm oil (CPO) and processed palm oil.

"We project June production will be flat m-o-m (month-on-month) and exports of palm oil to fall 6% m-o-m. In the first 10 days of June, Malaysian palm oil exports fell 6% against the same period in the previous month," Ng said.

Her comments followed the announcement on May oil palm sector numbers by the Malaysian Palm Oil Board (MPOB).

MPOB said May inventory fell 8.78% on month to 1.65 million tonnes while exports rose 9.33% to 1.28 million tonnes. CPO output climbed 4.86% to 1.36 million tonnes.

Ng said palm oil exports rose in May as traders bought ahead of the Hari Raya Aidilfitri celebrations next month.

She said CIMB maintained its "neutral" rating on the plantation sector after the May inventory, production and export numbers announcement.

"We are neutral on the declining stockpile as it is broadly in line with expectations.

"The main takeaway is the steep 25% y-o-y (year-on-year) drop in CPO production in May 2016, resulting in the lowest production for the month of May since 2007. We believe this was mostly due to the 10–12 months lagged impact from the El Nino and likely also due to the worsening shortage of estates workers in West Malaysia following the freeze in recruitment of foreign workers since February 2016," Ng said.