KUALA LUMPUR (June 5): Inventories est. -4.7% m/m and +33% y/y to 2.07m tons at end of May due to declining output, CIMB regional head of agribusiness Ivy Ng says in June 4 report.
* Crude palm oil production est. -5.8% m/m, -11% y/y to 1.47m tons, according to survey of 26 plantation areas by CIMB Futures
** Compares with avg. May increase of 7.3% m/m over past 10 years
** Difference may be due to replanting in some estates and start of Ramadan fasting month on May 17 which may affect worker productivity
** Sabah estates likely had weakest m/m production, Sarawak output had smallest m/m drop
* Exports est. -9.4% m/m to 1.4m tons
** Decline due to 64% m/m drop in Indian demand and 5% decline in EU; Partially offset by stronger demand from China, U.S.
* Rise in crude oil prices to 3.5-year high helped revive biodiesel demand
** Recent report that Indonesia plans to raise biodiesel mandate to at least 25% in 2019 could bring consumption to 5.5m-6m kls
*** That’s higher that 2.57m kls in 2017 and 3.52m kls target this year
** "If executed, this will be bullish for the CPO price in 2019"
* Lower stockpiles in May slightly positive for CPO prices, though will be offset by concerns over weak demand from key market India: Ng
** Prices seen trading in RM2,300-RM2,600 /ton range in June; avg. RM2,700 /ton in 2018
* CIMB maintains neutral rating on sector