KUALA LUMPUR: Malaysia's crude palm oil output is estimated to fall nine per cent month-on-month (MoM) in February but grow 11 per cent year-on-year (YoY) to 1.26 million tonnes.
CGS-CIMB Research noted that the monthly decline in production was due to seasonality and fewer working days.
"January and February have historically been the low production months for Malaysian palm oil.
"Malaysian palm oil exports likely grew 1.2 per cent MoM and 4.7 per cent YoY to 1.15 million tonnes in Feb, based on export statistics by cargo surveyors," said its analyst Ivy Ng.
The research firm estimated that Malaysia's palm oil inventory probably fell three per cent MoM and 45 per cent YoY to 2.2 million tonnes in end-February 2023.
"Our February 2023 palm oil stock level estimate of 2.2 million tonnes in Malaysia is 13 per cent above the 10-year historical February average of 1.95 million tonnes," it said.
The research firm stated that official figures for CPO would be released on March 10.
Spot CPO prices were flattish MoM at RM3,908 per tonne in February as Indonesia's government started restricting palm oil exports to ensure sufficient palm oil supply in Indonesia to cater to the Lebaran festival.
The tight palm oil supplies in Indonesia have raised the domestic CPO price in Indonesia to RM3,852 per tonne, which has helped improve the competitiveness of Malaysian palm oil exports vis Indonesia.
"The average CPO price for the two months in 2023 of RM3,915 per tonne fell by 31 per cent YoY, broadly in line with our CPO price forecast of RM3,800 per tonne for 2023.
"We are of the view that there could be an upside to CPO prices in the near term as Indonesia has suspended some palm oil export permits, limiting exports," it said.
On top of this, the research firm also noted that Indonesia raised its biodiesel mandate to 35 per cent last month from 30 per cent.
The firm also noted that the recent floods in Johor would negatively impact palm oil production in March, as Johor produced around 16 per cent of Malaysia's total palm oil output in 2022.
"On top of this, there could be concerns that soybean crops from Argentina could be lower than expected due to dry weather.
"However, the upside to CPO price could be capped by improved palm oil supplies in the late second quarter, with the government easing conditions for hiring foreign workers for the plantation sector on January 17.
"We expect the CPO price to trade in the RM3,800-RM4,300 per tonne range in March," said the firm.
It reiterated its 'Neutral' call on planters.