Periodic/Sector reports
Plantation: Fifth Straight Build As Exports Retreat
Highlights
- MPOB's Aug 26 data showed a 7.5% rise in Malaysia's palm oil stockpiles to 2.82m tonnes, the highest for any August on record. Production (1.82m tonnes) printed above our own survey, while exports (1.29m tonnes) fell far less than cargo surveyors implied.
- Stocks should keep building into the September-October seasonal production peak and we maintain our expectation for inventories to test 3m tonnes by end-September.
- Maintain OVERWEIGHT, underpinned by structural demand growth from the regional biofuel mandate expansion. Sector picks: SD Guthrie (BUY/Target: RM7.25) and KL Kepong (BUY/Target: RM24.65).
Analysis
- MPOB's Aug 26 data. Palm oil inventory rose to 2.82m tonnes (+7.5% mom), a fifth straight build, the highest August reading on record and the highest level since Dec 25. The build re-accelerated after two months of deceleration (+4.8% in June, +3.3% in July, +7.5% in August). The stock/usage ratio deteriorated to 1.69x from 1.49x, reversing two months of improvement, as absorption stopped keeping pace with the seasonal growth in supply.
- Production rose 1.4% mom to 1.82m tonnes, the highest monthly output in eight months, though 2.0% below that of Aug 25, and above our own survey, which had pointed to a 2-6% mom decline. Peninsular Malaysia (+2.5% mom) and Sarawak (+4.7% mom) drove the increase, while Sabah fell 5.6% mom, a second straight decline we continue to attribute to its earlier rainfall deficit. 8M26 output of 12.63m tonnes is flat yoy.
- Exports fell 7.5% mom to 1.29m tonnes, giving back most of July's 15.1% recovery, though the decline was far shallower than cargo surveyors implied with ITS estimating a 14.9% mom decline in full-month shipments. Indian buying normalised after July's festival restocking. Oleochemical shipments fell 12.7% mom to 233,545 tonnes and biodiesel rose 22.6% mom to 35,240 tonnes. 8M26 exports of 10.44m tonnes indicate an 8.7% yoy rise.
- Imports were flat at 49,524 tonnes (-0.1% mom), a second month at depressed levels after June's surge, when Indonesian sellers moved cargo ahead of Jakarta’s B50 implementation. Implied domestic disappearance rose 4.8% mom to 375,769 tonnes but remains 24.7% below Aug 25.
- Outlook. Production should peak in September-October and we maintain our call for stocks to test 3m tonnes by end-September. August rainfall of 152mm/month was the lowest of 2026, with West Peninsular (108mm) and Sarawak (136mm) in deficit. More immediately, this build is export-led rather than supply-led; 8M26 production is flat yoy while exports are 8.7% higher.
Highlights
- MPOB's Aug 26 data showed a 7.5% rise in Malaysia's palm oil stockpiles to 2.82m tonnes, the highest for any August on record. Production (1.82m tonnes) printed above our own survey, while exports (1.29m tonnes) fell far less than cargo surveyors implied.
- Stocks should keep building into the September-October seasonal production peak and we maintain our expectation for inventories to test 3m tonnes by end-September.
- Maintain OVERWEIGHT, underpinned by structural demand growth from the regional biofuel mandate expansion. Sector picks: SD Guthrie (BUY/Target: RM7.25) and KL Kepong (BUY/Target: RM24.65).
Analysis
- MPOB's Aug 26 data. Palm oil inventory rose to 2.82m tonnes (+7.5% mom), a fifth straight build, the highest August reading on record and the highest level since Dec 25. The build re-accelerated after two months of deceleration (+4.8% in June, +3.3% in July, +7.5% in August). The stock/usage ratio deteriorated to 1.69x from 1.49x, reversing two months of improvement, as absorption stopped keeping pace with the seasonal growth in supply.
- Production rose 1.4% mom to 1.82m tonnes, the highest monthly output in eight months, though 2.0% below that of Aug 25, and above our own survey, which had pointed to a 2-6% mom decline. Peninsular Malaysia (+2.5% mom) and Sarawak (+4.7% mom) drove the increase, while Sabah fell 5.6% mom, a second straight decline we continue to attribute to its earlier rainfall deficit. 8M26 output of 12.63m tonnes is flat yoy.
- Exports fell 7.5% mom to 1.29m tonnes, giving back most of July's 15.1% recovery, though the decline was far shallower than cargo surveyors implied with ITS estimating a 14.9% mom decline in full-month shipments. Indian buying normalised after July's festival restocking. Oleochemical shipments fell 12.7% mom to 233,545 tonnes and biodiesel rose 22.6% mom to 35,240 tonnes. 8M26 exports of 10.44m tonnes indicate an 8.7% yoy rise.
- Imports were flat at 49,524 tonnes (-0.1% mom), a second month at depressed levels after June's surge, when Indonesian sellers moved cargo ahead of Jakarta’s B50 implementation. Implied domestic disappearance rose 4.8% mom to 375,769 tonnes but remains 24.7% below Aug 25.
- Outlook. Production should peak in September-October and we maintain our call for stocks to test 3m tonnes by end-September. August rainfall of 152mm/month was the lowest of 2026, with West Peninsular (108mm) and Sarawak (136mm) in deficit. More immediately, this build is export-led rather than supply-led; 8M26 production is flat yoy while exports are 8.7% higher.
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