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Sharpfokus Palmweekly

Are the MPOB stocks about to break to a new low?

Chart is here
April 22, 2022
2 minute read

Stocks
  • Malaysian month end palm oil stocks haven’t had much impact on the market price for quite a long time now.
  • The stocks are definitely low & the decline a couple of years ago from 3m tons was one major reason the price rallied.
  • But recently the price has continued to rally despite stocks rising slightly. But is this temporary divergence about to be explained?

2019
  • Bach in 2019 stock levels were high. At the beginning of the year despite seasonally low production stocks rose above 3m tons to 3.06 million in February.
  • This was one reason why the price was so low then.
  • But in April inventory started to decline. The decline brought stocks down to 2n tons by year end, sparking the first palm oil price rally.

2020
  • Early 2020 saw stocks/inventory falling below 2m tons during the low production first quarter.
  • Stocks rallied briefly back to above 2m tons in April & May before plunging down to the recent low of just 1.26m tons in December.
  • This is what caused the breakout rally in the ringgit price of palm oil to above 3,000 ringgit at that time.

2021
  • Then in 2021 the price & stocks level have diverged as we mentioned above.
  • The stocks level started to rise in March, first to 1.5m tons & then up to 1.88m tons by August. Stocks then fell back a bit by December.
  • All the while the palm oil price continued to surge though as if the market knew something we didn’t know.

2022
  • In 2022 the decline which started in late 2021 continues. With low first quarter production, stocks have fallen to 1.47m tons in March.
  • This is flat from 1.44m low in March last year, which is the lowest March.
  • A move lower in April stocks on low production, strong demand would signal new record lows for stocks, confirm the price signal & push prices higher.

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