KUALA LUMPUR: The local plantation sector is expected to see a stronger demand throughout the remaining months in 2023, according to Public Investment Bank Bhd (PublicInvest)
This is underpinned by the wide gap between palm oil and soybean oil prices as well as concerns over the El-Nino pattern.
In a surprise development, Malaysia's palm oil inventories reportedly surged the most in two years to enter the 2 million tonnes threshold on the basis of stronger production for second straight month and weaker exports.
Palm oil stocks rose to seven month high, up 22.5 per cent month-on-month (MoM) to 2.12 million tonnes, the highest since January this year.
As for weak exports, it was dragged by China and India and partially offset by demand from European Union, the Middle East and the US.
"India's palm oil imports rose from 1.09 million tonnes in July to 1.12 million tonnes in August, the highest in nine months, as refiners built up inventories ahead of upcoming festival as well as concerns over local soybean and groundnut production as the country experienced its driest August in more than a century," it said.
The average crude palm oil price has gone down from RM3,890 per tonne to RM3,799 per tonne in August which recorded a 2.3 per cent decline from July.
PublicInvest is calling for a comprehensive review of the windfall levy's price threshold, levy rate and oil palm replanting.
"The existing levy is charged at a rate of 3.0 per cent on palm oil prices above RM3,000 per tonne in Peninsular Malaysia and at a rate of 3.0 pe rcent on palm oil prices above RM3,500 per tonne in East Malaysia.
"Meanwhile, there are currently over 664,000 hectares of oil palm trees in the country that are above 25 years, which is overdue for replanting,"it said.
This makes up 11.7 per cent of the total oil palm planted area and by 2027, 35 per cent of total oil palm planted area can be considered as old.