PETALING JAYA: A deficit situation in the global vegetable oils will lend support to crude palm oil (CPO) prices going into 2021, says Rabobank.
The specialist food and agribusiness bank had forecast that the average CPO price will be 5.7% higher at RM2,750 per tonne for next year compared with this year.
This is based on the overall supply and demand factors of palm oil and global vegetable oils, Rabobank said in its newly released Agri Commodities Outlook 2021 report.
The annual outlook entitled “Bull Waves Don’t Break” tracked the prospects for a basket of 13 key agri-commodities, including palm oil in 2021.
According to Rabobank, severe floods in South-East Asia that will reduce palm oil production.
The temporary closures of the oil palm estates in Malaysia, successful implementation of B40 mandate by Indonesia and stronger-than-expected import demand from India and China could also result in its “high-case” palm oil price at RM3,325 per tonne next year.
On the other hand, palm oil could be traded at a “low case” of RM2,450 per tonne next year if “there are weaker-than-expected import demand from India and China, higher-than-expected palm oil production as well as lower domestic biodiesel consumption by Malaysia and Indonesia.”
In terms of global production, Rabobank had forecast an increase by 3.1 million tonnes or 4% year-on-year (y-o-y) to 80.3 million tonnes on the back of production recovery in Indonesia and Malaysia.
“The La Niña weather phenomenon in 2021 is expected to increase precipitation in Southeast Asia.
“On top of this, due to a high palm oil price environment, planters in Indonesia and Malaysia have increased their fertilizer application in 2020 compared with 2018 and 2019.
“These two factors will positively impact palm oil production in Indonesia and Malaysia in 2021, ” the bank added.
In Malaysia, Rabobank said the worsening labour shortage situation and potential temporary closures in the palm oil industry – should Covid-19 outbreaks not be brought under control – could still affect palm oil production negatively in 2021.
The global palm oil demand is forecast to increase in 2020-2021, by 2.2 million tonnes or 3% y-o-y to 77.5 million tonnes.
Rabobank has pointed out that the agri-commodity markets are set to begin 2021 with high prices with a range of factors that are likely to see prices hike further.
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