Crude palm oil prices expected to stay firm


Loss of edge: Fry says the recent surge in CPO prices has reduced its competitiveness against competing oils.

KUALA LUMPUR: Palm oil industry expert James Fry expects crude palm oil (CPO) prices to remain firm, trading above RM3,000 per tonne this year as production prospects in Indonesia and Malaysia soften.

He projected CPO to trade between RM3,000 and RM3,100 per tonne in the next two to three months.

“For the first half of 2020, we expect CPO prices to remain at an average of RM3,000 per tonne as production prospects remain soft due to slowing in demand of fertilisers and the prolonged dry spells,” he said at the Malaysian Palm Oil Board’s (MPOB) Review & Outlook Seminar 2020 here yesterday.

For the second half of the year, CPO prices will likely trade between RM2,750 and RM2,800 per tonne assuming that the crude oil prices remain at the current level, added Fry.

He was quoted earlier by Bloomberg as saying that CPO prices will struggle to advance above RM3,300 in the next six months without higher petroleum prices as it loses its competitive edge over rival vegetable oils.

Fry noted that the recent surge in CPO prices has reduced its competitiveness against competing oils such as sunflower oil.

“The market is giving out strong signals to price-sensitive buyers to switch away from palm oil to other oils, notably sunflower and soybean oils,” said Fry.

Despite being the world’s most-consumed edible oil, palm oil prices have been on a decline over the last two years due to stubbornly high stockpiles, waning demand from top buyers such as India and China as well as increasing European restrictions linking palm oil to environmental harm.

But, that has reversed in the past two months when the CPO prices rallied more than 50% to trade above RM3,000 a tonne.

Fry also pointed out that any further CPO price rises would depend primarily on Brent crude oil prices moving higher.

“Crude oil prices set the floor prices of vegetable oil prices, we have moved very rapidly to a world in which US shale oil sets the price range for world crude price.

“The only big external change that could cause a big price increase for crude oil and vegetable oil is political,” he added.

Another speaker at the seminar, RHB Research Hoe Lee Leng expected CPO prices to consolidate following the significant jump to trade between RM2,700 and RM3,000 per tonne in the first half of the year.

“Overall, this year will be a better year for CPO price and the long-term prospects for CPO are positive due to slowing rate of new replanting programme in Malaysia and Indonesia since 2015,” she added.

On India’s plans to cut imports from Malaysia, Fry said an immediate consequence was Indonesian CPO prices move US$10 (RM40.70) higher per tonne above Malaysian price.

To meet the demand from India, Indonesia will be forced to export more CPO and reduced its higher value processed exports, while Malaysia will meet the shortfall by boosting refined palm exports as its CPO shipments will sharply drop due to India’s move,” he pointed out.

India would need nine million tonnes of CPO in a year, he added.

Meanwhile, Bernama reported that MPOB director-general Dr Ahmad Parveez Ghulam Kadir expects 2020 to be a better year for the palm oil industry, with the CPO price seen averaging at RM2,750 per tonne.

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