Periodic/Sector reports
Plantation: Fourth Straight Build, But The Pace Is Easing
Highlights
- MPOB's Jul 26 data showed a 3.3% rise in Malaysia's palm oil stockpiles to 2.63m tonnes, the highest for any July on record and above the 2.61m Reuters consensus. Production (1.79m tonnes) and exports (1.39m tonnes) both printed above consensus.
- Production should climb further into the September-October seasonal peak and we expect the build to extend through 3Q26, with stocks testing 3m tonnes by end-September.
- Maintain OVERWEIGHT, underpinned by structural demand growth from regional biofuel mandate expansion. Sector picks: SD Guthrie (BUY/Target: RM7.25) and KL Kepong (BUY/Target: RM24.65).
Analysis
- MPOB's Jul 26 data. Palm oil inventory rose to 2.63m tonnes (+3.3% mom), a fourth straight build and the highest July on record, above the 2.61m Reuters consensus and its highest level since Feb 26. The stock build-up has decelerated for two consecutive months (+5.2% in May, +4.8% in June, +3.3% in July). The stock/usage ratio eased to 1.50x from 1.56x, a second consecutive decline, indicating that absorption has continued to keep pace with the seasonal growth in supply.
- Production rose 9.4% mom to 1.79m tonnes, above the 1.76m consensus and the highest monthly output in seven months, despite being 1.1% below that of Jul 25. Peninsular Malaysia (+10.6% mom) and Sarawak (+16.9% mom) drove the increase, while Sabah slipped 1.0% mom. The output decline in Sabah is attributed to the lagged effect of its rainfall deficit seen in April.
- Exports rose 14.5% mom to 1.39m tonnes, above the 1.38m consensus and a second consecutive monthly increase. Cargo surveyor estimates placed July shipments up 12.1-19.5% mom, and the MPOB print landed close to the midpoint of that range. Indian restocking ahead of the festival season was a major swing factor, with India's total edible oil imports reaching a 10 month high in July.
- Imports halved to 49,566 tonnes (-51.9% mom) as the 103,113 tonnes seen in June reflected a rush by Indonesian sellers to move cargo ahead of Jakarta’s B50 implementation. Meanwhile, implied domestic disappearance fell 10.8% mom to 365,871 tonnes, the lowest monthly reading since Sep 25.
- Outlook. Production should climb further into the September-October seasonal peak and we expect the build to extend through 3Q26, with stocks testing 3m tonnes by end-September. The offset is that absorption has improved for two consecutive months, so the pace of accumulation should stay slower than the headline production increase implies.
Highlights
- MPOB's Jul 26 data showed a 3.3% rise in Malaysia's palm oil stockpiles to 2.63m tonnes, the highest for any July on record and above the 2.61m Reuters consensus. Production (1.79m tonnes) and exports (1.39m tonnes) both printed above consensus.
- Production should climb further into the September-October seasonal peak and we expect the build to extend through 3Q26, with stocks testing 3m tonnes by end-September.
- Maintain OVERWEIGHT, underpinned by structural demand growth from regional biofuel mandate expansion. Sector picks: SD Guthrie (BUY/Target: RM7.25) and KL Kepong (BUY/Target: RM24.65).
Analysis
- MPOB's Jul 26 data. Palm oil inventory rose to 2.63m tonnes (+3.3% mom), a fourth straight build and the highest July on record, above the 2.61m Reuters consensus and its highest level since Feb 26. The stock build-up has decelerated for two consecutive months (+5.2% in May, +4.8% in June, +3.3% in July). The stock/usage ratio eased to 1.50x from 1.56x, a second consecutive decline, indicating that absorption has continued to keep pace with the seasonal growth in supply.
- Production rose 9.4% mom to 1.79m tonnes, above the 1.76m consensus and the highest monthly output in seven months, despite being 1.1% below that of Jul 25. Peninsular Malaysia (+10.6% mom) and Sarawak (+16.9% mom) drove the increase, while Sabah slipped 1.0% mom. The output decline in Sabah is attributed to the lagged effect of its rainfall deficit seen in April.
- Exports rose 14.5% mom to 1.39m tonnes, above the 1.38m consensus and a second consecutive monthly increase. Cargo surveyor estimates placed July shipments up 12.1-19.5% mom, and the MPOB print landed close to the midpoint of that range. Indian restocking ahead of the festival season was a major swing factor, with India's total edible oil imports reaching a 10 month high in July.
- Imports halved to 49,566 tonnes (-51.9% mom) as the 103,113 tonnes seen in June reflected a rush by Indonesian sellers to move cargo ahead of Jakarta’s B50 implementation. Meanwhile, implied domestic disappearance fell 10.8% mom to 365,871 tonnes, the lowest monthly reading since Sep 25.
- Outlook. Production should climb further into the September-October seasonal peak and we expect the build to extend through 3Q26, with stocks testing 3m tonnes by end-September. The offset is that absorption has improved for two consecutive months, so the pace of accumulation should stay slower than the headline production increase implies.
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