Malaysia's Palm Oil Inventory Surges, El Nino Looms Over Supply
The global palm oil market is facing a complex situation as Malaysia's inventory levels have reached their highest point this year, but analysts warn of a potential supply squeeze next year due to the impact of El Nino on production.
The current high inventories are largely attributed to increased production and softer export demand. According to CIMB Securities, Malaysian palm oil exports fell 7.5% month-on-month and 2.4% year-on-year in August, likely reflecting weaker demand amid elevated CPO prices.
RHB Research expects CPO prices to average between RM4,400 and RM4,500 a tonne this year, with some forecasting firmer prices in 2027 as the impact of El Nino begins to weigh on production. PublicInvest attributed the lacklustre exports partly to stiff competition from Indonesia, with the gap between Malaysian and Indonesian CPO prices currently at about RM1,000 a tonne.
The three research houses remain broadly positive on CPO prices and the plantation sector, maintaining their 'Overweight' calls on the sector. CIMB Securities' top picks are IOI Corp Bhd, Kuala Lumpur Kepong Bhd, and Hap Seng Plantations Holdings Bhd, while RHB Research favours Sarawak Oil Palms Bhd, IOI Corp, Hap Seng Plantations, SD Guthrie Bhd, PT Triputra Agro Persada Tbk, PT Perusahaan Perkebunan London Sumatra Indonesia Tbk, and First Resources Ltd.