Malaysia’s crude palm oil (CPO) stockpile fell to a five-month low in March and it’s set to fall further ahead, DBS said in a note on Thursday.
Inventories fell to 2.3 million MT in March, down 6 percent on-month, on stronger-than-expected exports as purchases ahead of Ramadan weighed on the stockpile despite a larger-than-expected output during the month, the bank said, adding higher CPO affordability likely helped spur a 14 percent on-month export rise.
“We are expecting inventory to drop further to 2.1 million MT in April, on the back of an export uptrend and mild CPO output,” DBS said.
That stockpile level improvement is set to support CPO prices, the bank said.
“While the stockpile level was in line with our estimate, we believe CPO prices will track our average CPO price assumption of 2,620 ringgit per MT,” it said.
But it didn’t expect the threatened U.S.-China trade war would change CPO’s long-term outlook much.
“China’s 25 percent import tariff on U.S. soybean oil could provide short-term benefits to CPO prices, especially if CPO is required to fill any potential volume gap left by soybean oil in the first three months of the implementation of such a tariff,” it said. “However, we do not see any structural changes in China’s palm oil consumption trend.”
While output in March rose 17 percent on-month, and 8 percent on-year, amid stronger-than-expected yields across the region, output is likely to fall in April, it said.