Malaysia's crude palm oil (CPO) in 2011 posted new records in terms of production at 18.9 million tonnes, exports at 18 million tonnes and the average price of RM3,247 per tonne respectively.
A year earlier, production stood at 16.9 million tonnes, exports at 16.7 million tonnes and average CPO price at RM2,701 per tonne respectively.
Malaysian Palm Oil Board (MPOB) in its December 2011 statistics released on Tuesday showed that end-December palm oil stocks closed higher at 2.04 million tonnes, compared with 1.62 million tonnes in December 2010.
The 2011 end-December stock, had stayed above the two million tonnes mark for the fourth consecutive months.
Historically, analysts said inventory remained above two million tonnes for only two consecutive months.
For the month under review, CPO production fell to a nine-month low at 1.49 million tonnes, exports down 4.5% to 1.59 million tonnes but average price of fresh fruit bunches rose to RM33.2 per tonne versus RM32.82 per tonne in the previous month.
Based on the latest MPOB statistics, a trader told StarBiz that CPO could likely stay at about RM3,000 per tonne in the first quarter of 2012, but the situation might change for the remaining part of the year.
“Fundamentals are getting weaker on ample supply situation amid weaker demand given a protracted debt crisis in the United States and Europe,” he said.
Furthermore, Indonesia's massive new planting in 2008 of almost 600,000ha, will also start to hit the world market in 2012 and 2013.
Maybank IB Research in its latest report said local inventory this month could likely remain at two million tonnes “if palm oil downtrend sales trend persist.”
Independent cargo surveyors, Societe Generale de Surveillance (SGS) and Intertek had estimated a 19% drop at 352,800 tonnes and a 16% drop at 371,635 tonnes in exports during the first 10 days of January.
The research unit is maintaining its average CPO price forecast at RM2,600 per tonne in 2012 for now against RM3,247 in 2011 as “we have imputed an external economic slowdown that will hurt global demand.”
However, it will also closely monitor recent dry spell in South America that may result in some soybean crop damages and could eventually lead the unit to revise slightly upwards its CPO price assumption.
Meanwhile, OSK Research in its regional plantation sector is maintaining the average CPO price for 2012 at RM3,000 per tonne as “we believe that palm oil will be in an abundant supply this year.”
While the research unit does not believe the current price rally will sustain beyond the first quarter, it expects there would be more upside in the immediate term as concerns over South America's soybean planting and seasonally weak production will be supportive of higher prices.
“We believe that CPO price will undergo an unexciting period after the first quarter peak as production hits trough and an upcycle begins.
“It is too early to be overweight on the sector but we do think that 2013 will see the start of several years of strengthening palm oil price as supply in Indonesia potentially reaches a plateau,” added OSK Research.