KUALA LUMPUR: Crude palm oil (CPO) prices are expected to be stable at above RM4,000 per tonne for the third quarter of 2021 before weakening in the fourth quarter due to the expected recovery in production.
According to Malaysian Palm Oil Board director general Dr Ahmad Parveez Ghulam Kadir, improvements in production and exports are expected to sustain in the following year, supported by positive developments in the COVID-19 situation, better prospects for global oils and fats, as well as favourable trade policies in competing and importing countries.
"Meanwhile, palm oil prices in 2021 are expected to average at RM4,000 per tonne, an increase of 49 per cent compared to RM2,685 per tonne in 2020, due to expected lower CPO production,” he said during the World Palm Virtual Expo and Conference 2021 today.
As for the CPO production for 2021, he said the local production was forecast to be around 18 million tonne, lower than in 2020, which was partly caused by limited labour supply arising from the national border closure and less availability of fresh fruit bunches (FFB).
"The production growth for the second half of 2021 (2H2021) is expected to be lower than 2H2020 due to expected lower FFB production and slight decrease in matured area,” he said.
On palm oil stocks, he said the local closing stocks for this year were expected to increase to 1.7 million tonnes compared to 1.27 million tonnes in December 2020, mainly attributed to the expected higher CPO production in November and December 2021 compared to the previous year.
"Nevertheless, the stocks are expected to remain tight in view of low vegetable oils stocks in major importing countries which encourages palm oil demand,” he pointed out.
On exports, Ahmad Parveez said total exports in 2021 would likely decline by 6.3 per cent year-on-year to 16.3 million tonnes due to tight supply availability and decline in production although palm oil demand was expected to be stronger this year.
However, he noted that palm oil export to India surged by more than twofold in the period from January to July this year to 1.8 million tonnes from 0.85 million tonnes a year earlier, partly attributed to higher Indonesian export tariff of palm oil.
"In regards to the European Union, export declined by 18.1 per cent to 0.97 million tonnes due to the implementation of the Renewable Energy Directive (RED II) for biodiesel usage,” he explained.
He said the border closure, which limits the mobility of people across borders, had worsened the labour shortage issue in the palm oil sector, which saw total labour shrinking by 6.6 per cent between April 2020 and June 2021.
"The shortage of labour has caused FFB production during the period to reduce by 3.8 per cent,” he added. - Bernama