Business

Plantation sector remains in negative territory

Syndicated News
Written by Syndicated News

KUALA LUMPUR, Aug 14 2019 : The plantation sector remains in the negative territory as it enters into a seasonal higher output period, said MIDF Research in its sector update report today.

According to the research house, July 2019 palm oil stockpiles had risen by 8.0 per cent year-on-year (y-o-y) to 2.4 million metric tonnes.

“This came in lower than both Bloomberg and Reuters consensus by -3.2 per cent y-o-y and -3.1 per cent y-o-y respectively,” it said, adding that the monthly inventory level has been on the rise on a year-over-year basis for the past 25 months since July 2017.

“This was mainly attributable to the higher production level as the palm oil industry enters into its high production period which offset the higher export demand.”

On a month-over-month (m-o-m) basis, it recorded a marginal decline of – 0.8 per cent m-o-m, the slowest decrease recorded since March 2019.

“We are of the view that the expected higher output in coming months will add pressure on inventory level which will continue to suppress the crude palm oil (CPO) price,” it said.

MIDF also said the price for CPO remains below RM2,000 per metric tonne, despite the average July 2019 CPO spot price has rebounded to RM1,927 per metric tonne from RM1,872 per metric tonne in June 2019.

“Despite the increase, it still represented a fall of 10.5 per cent y-o-y as compared to July in the prior year.”

The declines in the strength of the Ringgit Malaysia against the US dollar said the research house, might be a supporting factor for the CPO price as a weaker ringgit would normally boost export demand for Malaysian palm oil.

“However, coupled with both the current oversupply issues and higher output period, we expect some resistance in the recovery of CPO price to above RM2,000 metric tonne level in the near term.

“Hence, MIDF is maintaining its negative stance on the sector with an unchanged 2019 CPO price target of RM2,090 per metric tonne,” said MIDF.

As of 10.37 am, most of the plantation related stocks are on the retreat with FGV down one sen to RM1.08, PPB lost six sen to RM18.70, Kuala Lumpur Kepong declined 36 sen to RM23.20, IJM Plantation was flat at RM1.37.

Meanwhile, Sime Darby Plantation rose five sen to RM4.65, and IOI Corporation was up one sen to RM4.21.

The overall plantation index was down 3.57 points to 6688.09 at the time of writing. – Bernama

Comments

comments

About the author

Syndicated News

Syndicated News

News sourced from Bernama, Reuters, AFP and other accredited news agencies, including credible blogsites and news portals.