analysts are bullish that the CPO average price this year will be in the RM2,500-to-RM2,800-per-tonne range, which is much higher than last year
KUALA LUMPUR: Affin Hwang Capital Research has maintained its crude palm oil (CPO) average selling price (ASP) assumption of RM2,600 per tonne.
The research house has a “neutral” call on the plantation sector.
CPO production in May continued to trend higher mom and year-on-year (yoy), on the back of a production recovery post the El Nino phenomenon.
Affin said in May, Malaysia CPO production grew by another 6.9% month-on-month to 1.65 million tonne. On a yoy basis, CPO production improved for the sixth straight month, climbing up by 21.2%.
“The recovery in production is as expected given the previous El Nino phenomenon had badly affected production back in 2015-16,” it added.
Total CPO production in 5M17 was up by 18.9% yoy to 7.2 million tonne. All regions recorded
yoy increases in FFB yields as well as oil-extraction rates (OER).
Meanwhile, palm oil exports in May increased for a third straight month by 17.3% mom to 1.51 million tonne, indicating an improvement in demand prior to the Ramadhan (fasting) season.
Affin noted that palm oil exports to the key buyers India, Iran, Pakistan, the EU and Vietnam increased by 70.1%, 200%, 97.5%, 3.5% and 33.7% mom respectively, while palm oil exports to China and Turkey declined by 17.6% and 85.4% mom respectively.
For 5M17, total palm oil exports increased by 4.7% yoy to 6.45 million tonne. Palm oil inventory declined for the first time since February by 2.6% mom to 1.56m MT.
Affin said the the current stock level translates to about 1.03 months of exports, which was still sufficient.
The average MPOB locally-delivered CPO prices improved in May to RM2,803.50 per tonne, higher by 1.9% mom from RM2,752.50 per tonne in April.
Affin believes the higher prices could be due to the Ramadhan season as well as the rebound in soybean prices.
It said the increase in May CPO prices was slightly more than the increase in soybean oil prices, and this has marginally narrowed the soybean oil premium over CPO to about US$100 per tonne in April from approximately US$105 per tonne in April.
“We believe that in anticipation of high er palm oil production in the coming months, CPO prices have weakened to the RM2,700 per tonne level in the first ten days of June,” Affin said.
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