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Comments on MPOB Report 10 Jul 2008

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M’sia: PALMOIL Supply-Demand Balance Estimates/Projections 2008

As of FRI Jly 10, 2008.  All quantities in ‘000MT

 

	2008
	JAN – DEC*	JAN-JUNp	Q2p	May #	Jun p
Opening stocks	1,682	1,682	1,825	1,790	1,913
Imports	380	287	130	22	28
Production	17,100	8,201	4,254	1,458	1,469
Ttl supply	19,162	10,170	6,209	3,270	3,410
Exports	15,062	6,930	3,580	1,200	1,120
Appar dom disapprnce*	2,252	1,205	594	156	255
Ttl offtke	17,312	8,135	4,174	1,357	1,375
Ending stocks	1,850	2,035	2,035	1,913	2,035

 

*    Include refining loss and exports of finished products (e.g. shortening)

 *  projection     #   revised     p  preliminary    e  estimate.

 
Source: MPOB n private  sources.                                                                Gatetrade, Jly 10, 2008.                                                                                             

 CPO production in Jun slowed down as expected. It rose marginally by 11,000t or 0.8% to 1.469mln t. with

 
PM’sia alone registering an increase of 11,000. In EM’sia  a slight increase in Sarawak was totally offset by a decline in Sabah. The  mostly low single-digit month-on-month increases since Mar is not surprising because production had started off in Jan at a very high level.

 

On a year-on-year basis growth remained robust at 26.5% in Jun, up from 21.4% in May and 17.9% in Apl which brought the rate of expansion in the second quarter to 21.8%. This compares with 23.9% in the first quarter. Growth was most vigorous in PM’sia at 28.3%  and 36.8% respectively.  Jan-Jun production expanded 32.3% or 1.156mln t to 4.738mln t. This was due largely to record high yields of FFBs which

 
averaged at around 11.5 tons per hectare, up 27.8% from  the same period of last year. Our yield series showed the previous record high performance was at around 10.7 tons. Yields in terms of oil per hectare averaged 2.24 tons, also a record high with higher oil extraction rates further boosting output. FFBs

 
yields recorded in Sabah in Jan-Jun were also at or near record high.   We will leave our projected production of 17.1mln t in the country unchanged but will review it after we have conducted some fresh field surveys. Experience tells us growth in yields and output will decelerate in the second half-year, possibly as early as this month.

 
 Despite ample and growing supplies, PO offtake had slowed in May-Jun after reaching a high of around 1.46mln t  a month in Mar-Apl. Exports fell to just 1.12mln t in Jun from 1.252mln t a month in Mar-Apl. We

 
attributed the slowdown in offtake to cutbacks in consumption, edible as well as non-edible, arising from

sharp increases to sky-high levels in many food items and non-food items-- above all energy and fuel-related items-- which drastically reduced real incomes and purchasing power. This global inflationary situation has significantly driven  millions of people into poverty or near poverty as they struggle to survive.

Nevertheless the export growth of 14.4% or 872,000 t to 6.93mln t in Jan-Jun was commendable given

 
extreme price volatility since early this year which made marketing much more stressful and difficult.

 
 Jun marks the second consecutive month in which production comfortably exceeded offtake resulting in

further large buildups in stocks.. Stks rose a hefty 122,000t to a new record high of 2.035mln t which surpassed the previous record of 1.928mln t posted four months ago. Year on year  stocks jumped 835,000t

or 70%. The stocks-usage ratio rose to 1.48 from 1.41 in May and 1.07 a year ago. Processed palm oil

stocks alone rose to 1.079mln t, equivalant  to 96% of total exports of PO in Jun. CPO stocks at 956,500 t, equivalent to 17 days production, were manageable and below the record high level of 987,056 t in Mar.

 
 The record high opening PO stocks for last-half 2008 will have a moderating impact on global prices of vegoils and provide some relief  to consumers in developing countries, especially in the Indian sub-continent, Africa and China in the next several months. This is especially so when RBD Palm Olein is available at a discount of more than USD 150/MT  to SBO, its largest competitor. Ample supplies of PO mayl also have a restraining influence on  speculators inSBO and other expensively-priced vegoils.

 
Rgds                                                                                                                           Gatetrade,Jly 10, 2008

 

 

Posted at 04:05PM Jul 11, 2008 by MarketReports admin in Other Reports  |