CPO unlikely to return to 2022 record-high price

Outlook ahead: A man works at a plantation in Banting, Selangor. CPO price is forecast to be lower in 2023 than 2022 due to the anticipated stronger recovery in edible oil production and the build-up in inventory of edible oils.

THE historic spot crude palm oil (CPO) price at RM6,873 per tonne and CPO futures price at RM8,000 per tonne recorded in March 2022 will not likely be repeated this year, say industry experts.

Given the supply availability of other competing vegetable oils including soybean oil (SBO) and the appreciating ringgit, they opine that CPO is expected to post a lower average of around RM3,800 to RM4,000 per tonne in 2023 compared with RM5,100 per tonne in 2022.

“I don’t expect the hyperinflated crazy (CPO) prices recorded in early 2022 to recur in 2023,” notes industry expert M.R. Chandran.

His estimates are for CPO prices to trade between RM3,700 and RM4,400 per tonne this year or to realise an average of RM4,000 against RM5,200 per tonne in 2022.

Of late, CPO price discount to SBO has reduced from an all-time high of over US$600 (RM2,641) to US$470 (RM2,069) per tonne, he points out.

In order for local CPO to maintain its market share and prices at around RM4,000-per-tonne level, Chandran says CPO will need to trade at around US$400 (RM1,761)-per-tonne discount to SBO.

Also, despite the dramatic hike in plantation input costs, he reckons a price of RM4,000 per tonne will enable efficient planters with a productivity level of 22 tonnes fresh fruit bunch (FFB) per ha or 4.5 tonnes CPO per ha to realise attractive margins.

Malaysian Palm Oil Association chief executive Joseph Tek Choon Yee also concurs that CPO price is forecast to be lower in 2023 than 2022 due to the anticipated stronger recovery in edible oil production and set against a build-up in the inventory of edible oils.

“Notwithstanding this, a RM3,000 value per tonne CPO can be viewed as the new price norm, as the cost of production for some plantation companies is already at this level set against their realised oil yields.

“Breaking below this price level may be a task for now but will also attract good demand,” he adds.

Tek, who is cautiously optimistic on the CPO price outlook, notes that both bullish and bearish factors will continue to interplay in price determination set against the backdrop of anticipated favourable global demand for palm oil, especially with China reopening its border.

Malaysian Palm Oil Board director general Dr Ahmad Parveez Ghulam Khadir.

Malaysian Palm Oil Board (MPOB) director-general Datuk Dr Ahmad Parveez Ghulam Kadir says: “Since there is no catalyst for a strong CPO price rebound seen in the near term, MPOB believes that the chances for CPO to return to its historic price (in 2022) are very minimal.”

The rally in CPO prices, particularly in March last year, was influenced by the higher global SBO and Brent crude oil prices in the world market, weaker ringgit against the US dollar as well as the geopolitical tensions between Ukraine and Russia, explains Parveez.

However, in 2023, the supply availability of other major vegetable oils, especially SBO, is expected to increase thus pushing the price to a decline, he adds.

Besides, the ringgit is also forecast to appreciate against the US dollar.

In 2023, MPOB expects CPO production to perform better with stronger demand as compared with 2022.