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Analysts Neutral On Plantation Sector With Crude Palm Oil Seen Averaging RM3,800 Per Tonne

Kenanga Research said that with supply matching demand or possibly dipping into a small deficit, the commodity is expected to end the year with inventory coming in below the level it started at. — Picture by Firdaus Latif

The research house said that with supply matching demand or possibly dipping into a small deficit, the commodity is expected to end the year with inventory coming in below the level it started at.

“The main issue is demand for edible oils which is underpinned mainly by population and income growth that is expected to continue growing at 3-4 per cent year-on-year (y-o-y), but supply is affected by tightening regulations, unpredictable weather and even geopolitical disruptions.

“Specifically for palm oil, Indonesia, the top producer and also user, looks set to manage exports till Hari Raya in April while India, a big palm oil importer, is likely to maintain generous levels of inventory pending an election in the first half of this year,” it said in a research note, maintaining a “neutral” call on the plantation sector.

RHB Investment Bank Bhd also maintained its neutral call on the plantation sector with the expectation of a higher CPO price environment in the first half of 2024.

The investment bank said it believes seasonally weaker output and the El Nino impact are anticipated to lower production in the months ahead.

“Although production is set to taper off in the coming months, export market demand may make a comeback in anticipation of the Aidilfitri festivities and restocking activities as stock levels should run down further. The anticipated stronger demand in the export market could lead to Malaysian palm oil stocks dropping below the two million tonne mark by next month, thus providing a boost to CPO prices,” it added.

Meanwhile, Public Investment Bank Bhd noted that despite the declining inventory trend, palm oil prices have remained range-bound in the last few months.

“Given the shorter working month in February, we expect inventories to fall below the psychological two million tonne level by end-February,” said the bank, which is also neutral on the plantation sector. ― Bernama

Source : MalayMail