Maybank IB: Average CPO Spot Price in Malaysia Increased 53pc YoY to RM5,171 in 4Q21 | Money

KUALA LUMPUR, Jan 4 – The spot price of crude palm oil (CPO) in Malaysia averaged RM5,171 in the fourth quarter of 2021 (4Q21), an increase of 53% year-on-year or a 17% quarter-over-quarter (QoQ) improvement, an analyst said.

In a research note, Ong Chee Ting, research analyst for Maybank Investment Bank (Maybank IB), said recent high prices were partly supported by fears of a supply disruption due to sporadic flooding. across Malaysia.

“We estimate Malaysia’s CPO production in December 2021 at 1.45 million tonnes or a slight decrease of 11% month-on-month, bringing production from 2021 to 18.1 million tonnes, a decrease of 5, 0% year-on-year.

“With record prices, we expect producers to deliver another round of sterling results in 4Q21,” he said.

Ong said that Bursa Malaysia Derivatives futures CPO (FCPO) price curves have tended to increase in QoQ since March 2020, which was broadly in line with soybean oil futures price curves in the United States, except for moderate soybean oil curves over the last two quarters.

“Currently the FCPO is in a big setback with 12 months FCFO at over RM1,000 per tonne remitting to RM1M FCPO of RM5,159 per tonne as of December 31, 2021,” he said.

The analyst said that in comparison, soybean oil futures’ price curves have been relatively flat against the FCPO.

“FCPO prices were higher over the next few months to reflect the expected tightening of supply as the industry enters seasonally low production months in 1Q22.

“While 1M FCPO is close to parity with 1M soybean oil, prices of 6-13M CPO come with attractive discounts of over $ 200 per tonne.

“Overall, for 2021, the CPO spot price was on average RM 4,430 per ton or improved 59% year-on-year,” he said, adding that the bank had estimated that the Malaysian Palm Oil Board’s December 2021 stock was less than the November 2021 1.82 million tonnes.

He noted that La Nina and the northeast monsoon brought above normal rainfall which has resulted in sporadic flooding in several states in Malaysia since early December.

Parts of Selangor, Pahang, Melaka, Negri Sembilan, Johor, Terengganu, Kelantan and Sabah were affected and real estate operations were halted for several days in the affected areas, he added.

“We understand that the yield losses have been manageable so far; offset by high CPO prices.

“However, the sector is still not out of the woods as the current rainy season is expected to last until March 2022 – any subsequent flood wave or prolonged flooding could severely damage infrastructure and further disrupt operations,” did he declare.

Record CPO and palm kernel increased 87% year-on-year or improved 52% QoQ, with average selling prices raising growers’ earnings outlook in 4Q21. Higher prices are expected to more than offset the anticipated weakness in the country’s QoQ production.

“Due to the heavy rainfall and the logistical challenges of getting enough fertilizer, we believe growers have little opportunity to administer the desired fertilizer requirements in 4Q21, further increasing the bottom line as production costs will likely be overwhelming. under control.

“The purer upstream producers with substantial operations in Malaysia, and those with little or no forward sales will continue to do relatively better than their peers in 4Q21,” the analyst said. Bernama