THE spot price of crude palm oil (CPO), which traded above RM1,900 per tonne yesterday, is expected to hit the “magic figure'' of RM2,000 very soon, going by the commodity's continued bullish performance.
The strong CPO price run-up is mainly supported by the rally in soya complex prices on the Chicago Board of Trade, which have hit a 5-1/2-year high, and the US$160 per tonne discount at which CPO is currently trading against soya bean on the exchange.
Other factors fuelling market sentiment include the seasonal 20% decline in Malaysia's palm oil production to 800,000 tonnes last month versus December 2003.
Furthermore, demand has been strong, with India – one of the biggest buyers of Malaysia's palm oil – registering a 91% month-on-month increase in imports in January (up 33% year-on-year) and there is talk that the country is considering cutting further its tariff on refined, bleached and deodorised palm oil.
An analyst with MIDF Sisma Securities One said that it would be safe to say the CPO price would hit the “magic figure'' of RM2,000 per tonne within the first quarter this year, but that it would be difficult for the price to be sustained above that level in the second and third quarters.
“I believe the RM2,000 level will somewhat mark the tail-end of the bullishness of the CPO price in the past three years,” another analyst said.
The determining factor will be the weather in the major soya-bean producing countries of Brazil and Argentina, which are expected to produce 96,500 tonnes of the commodity or 48% of the world's output this year.
The analyst said, however, that until the South American crop came on the market in March or April, the current tightness in world edible oils supply was likely to persist.
Meanwhile, Primary Industries Minister Datuk Seri Dr Lim Keng Yaik said he expected the CPO price to rise to RM2,000 per tonne “anytime now”.
He said, after chairing a meeting with representatives from the palm oil industry in Kuala Lumpur yesterday, that if the current price remained at RM1,900 per tonne, the industry's total income would exceed RM30bil this year, compared with RM28bil last year.
However, despite the firm palm oil price, Lim voiced dissatisfaction over the varying output from the country's 3.8 million hectares of plantations.
“We are targeting for oil palm plantations to produce eight tonnes of CPO per hectare a year by 2020,'' he said.
Malaysian Palm Oil Association (MPOA) chief executive M.R. Chandran said the association's 105 members, comprising mainly plantation companies, were already producing close to 4.4 tonnes of CPO per hectare a year, which exceeded the current national target of four tonnes per hectare. Last year's national average was 3.9 tonnes per hectare.
Chandran told StarBiz the MPOA's main task from this year would be to increase productivity.
“This will mean placing greater emphasis on replanting and effective research and development (R&D).
“Well-managed and vibrant R&D institutions are a requisite to drive the industry and its sustainability,'' he added.
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