PLANTATION growers in Malaysia are the "clear winners" amid the increasingly widening difference in crude palm oil (CPO) prices with Indonesia, Maybank Research said in a report on Thursday (Mar 10).

Indonesia's domestic market obligation (DMO), which mandated exporters to set aside a portion of their shipments to ensure sufficient and affordable domestic supply, has tightened global stockpiles and driven up CPO prices, noted analyst Ong Chee Ting.

While the market expects CPO output will increase in 2022, the additional DMO requirement will mean less exports to the market in 2022, tightening the already slim supply.

In March, prices are also facing further upward pressure after the Indonesia government raised the DMO requirement to 30 per cent of shipment, from 20 per cent currently.

Malaysia-centric growers should gain from these price increases, Ong said.

Indonesia-focused growers, however, are constrained by the domestic price obligation set by the Indonesian government for the affected DMO volume, which are "way below" Indonesia's local CPO prices.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

As such, the analyst has "buy" recommendations on Malaysia-listed Kuala Lumpur Kepong and Ta Ann Holdings, and Singapore-listed Bumitama Agri P8Z : P8Z 0%, adding that the gap in prices "can only widen further from here".

READ MORE:

• Maybank KE 'positive' on Malaysian plantation sector in 2022; UOBKH and RHB expect elevated CPO prices to moderate

• Brokers' take: Analysts bullish on Bumitama Agri, expect continued rally of CPO prices

• Scorching prices slow palm oil imports by top consumers India, China