PETALING JAYA: Prices of crude palm oil (CPO), which touched the lowest level in four years, rebounded following news that China will increase its purchase of US soyoil.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange was up RM16 to RM1,967 per tonne in intraday trading.
Last Friday, it fell to its lowest since mid-August 2015 at RM1,951 per tonne.
It was reported that after US president Donald Trump and Chinese president Xi Jinping have met on Saturday with plans to restart trade talks.
As part of the agreement, Trump said that Xi would buy “tremendous” amounts of US agriculture products, Bloomberg reported.
China is the world’s largest buyer of soybeans.
In July last year, China had retaliated against US tariffs with its own 25% tariffs on US-origin soybeans.
In a report last week, Maybank Kim Eng said it expected CPO prices to improve in the next 12 to 18 months because of the slowdown of palm oil output and because the negatives in the market have been priced in.
“We expect CPO price to recover from the present low, and narrow the price gap vis-à-vis other major competing oils since it has deviated from historical norms for almost 12 months now,” it said.
Nonetheless, the research house has cut its 2019-2021 CPO price forecast due to the weak first half of 2019 prices.
It has cut its 2019-2021 forecast to RM2,100, RM2,300 and RM2,400 per tonnes compared with RM2,350, RM2,500 and RM2,550 per tonnes, respectively.
“Key risks to our CPO price view are government policy changes, demand, direction of diesel price, and weather anomalies in major producing countries,” Maybank KE said.
The CPO prices in the first half were due to weak sentiment coupled with unexpected escalation in the US-China trade war in May, Maybank KE pointed out.
“The high stockpile till April 2019 and the subsequent escalation of the US-China trade war in May 2019 had prevented a more meaningful CPO price recovery throughout the first half of the year.
“CPO price is near its multi-year low, both in the ringgit and US dollar terms.
“The only positive is that the low palm oil prices over the past nine months has boosted demand for palm oil,” it said.
“As cliché as it sounds, industry experts are often quoted as saying that the cure for low CPO price is low price itself,” it added.
Maybank KE pointed out that the stronger demand over the past months has brought down stockpile to a more manageable level.
In the January-May period, Malaysia reported a draw down in stockpile by 0.8 tonne or 24%, as exports increased 12% outpaced production growth 10%.