MPOB Palmnews
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 Mahamad Rodzi Abdul Ghani
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KUALA LUMPUR, Nov 6 - Partial data available indicate palm output wassustained at a high plateau almost throughout the whole month of October.Our preliminary estimate shows CPO production rose around 50,000 tonnes or4.5 percent to 1.15 million tonnes.The crop was higher in both East Malaysia and Peninsular Malaysia. Theweather was wet and favoured both crop development and ripening. However,forecast of continued wet weather right up to December is likely todisrupt and delay the felling of old palms for replanting. Actualreplanting carried out is now expected to fall far short of the 185,000hectares which had been registered.On an annual basis, CPO production shrank an estimated 2.8 percent orworse than the contraction of 0.9 percent in September. We now estimatethe whole year's production to reach 11.65 million tonnes and 7.5 percenthigher than last year's output of 10.84 million tonnes.Palm oil offtake also turned out to be somewhat better than previousexpectations. Exports rebounded strongly to an estimated 885,000 tonnes inOctober from around 650,000 tonnes in the preceding month. The recoveryreflected chiefly a big increase of nearly 100,000 tonnes to 190,000tonnes in shipments to Europe including Russia.India and Pakistan respectively took some 75,000 tonnes and 65,000tonnes more after having reduced their offtake drastically in September.China remained a good buyer when it took an estimated 155,000 tonnes or15,000 tonnes more than a month earlier. However, contrary to expectationsand market talk, there were no increased offtake by the West Asian/MiddleEast countries ahead of Ramadan.Shipments to ASEAN countries also remained poor. It is significant tonote combined September-October exports at an estimated 1.515 milliontonnes represent a sharp contraction of 280,000 tonnes or 15.6 percentfrom the same period last year. We also project export performance in thenext 2-3 months to continue to register negative growth.Even though price of edible oils and fats are low, consumption hasbeen adversely impacted by the global economic slowdown. This is mostevident in developing countries where unemployment and under-employmentare rising and incomes have dropped sharply. Even the price of crude oilhas dropped to a two-year low of $20.Palm oil stocks registered another substantial buildup at end October.Estimated at 1.38 million tonnes, stocks were up 165,000 tonnes, bringingthe buildup over two months to nearly half a million tonnes. By the end ofthis month we may see stocks reaching 1.4 million tonnes. This would be90,000 tonnes higher than what we had projected early last month.CPO futures had fallen sharply by 450 ringgit from 1,315 ringgit onAugust 8 to 861 ringgit on October 8. Thereafter prices started torecover, with limited success during the second to third week but moreconfidently from the fourth week onward. The turnaround may have beentriggered by India's lowering of tariff values on palm oil on October 9but the recovery only assumed a sustained course when the market becameconfident that exports in October had indeed recovered strongly.Market confidence was further boosted when the Indian governmentfinally cut the import duty on CPO from 75 percent to 65 percent onNovember 1, a move that trimmed off the big advantage that imported SBOhad enjoyed over palm oil in the Indian market since March 1.Yesterday, the January CPO futures contract extended its run-up bysettling at 1,074 ringgit or 44 ringgit higher. This brought cumulativegains since October 22 to 158 ringgit. SBO prices also advanced whilesunoil and canola oil remained firm because of increasingly strongfundamentals.However, given the gloomy global economic outlook, Malaysian palm oilproducers-exporters must intensify their efforts to reduce stocks to morecomfortable levels in the coming months. Malaysia also faces even keenercompetition from Indonesia, morem so when its rupiah had lost more than 13percent of its value against the dollar in the past six weeks.Our next report will be released this Friday ahead of MPOB report onMonday, November 12.(The opinions expressed in this article represent the views of theauthor only. They should not be seen as necessarily reflecting the viewsof Reuters)