PETALING JAYA: Trading opportunities have emerged in the crude palm oil (CPO) futures market in the first quarter of this year, as prices are expected to trend higher in the near term.
According to Maybank Investment Bank (Maybank IB) Research, the price of CPO is expected to strengthen this month due to a low output cycle, lack of competing oils, and an expected Ramadan driven demand boost.
Its projection is for the CPO price to briefly breach RM4,200 per tonne in February to March this year.
Thereafter, however, the CPO price is expected to trend lower by mid-2024, as supplies improve with the availability of new South American harvests, and anticipation of CPO output recovery in the second half of 2024.
“Historically, the month of February is a good month for CPO price, having chalked up positive month-on-month returns 70% of the time in the past 20 years. Thereafter, CPO price has entered into correction phase 70% of the time in the month of March over the past 20 years,” Maybank IB Research said.
“Likewise, we believe the positive uptrend in three-month CPO futures price would sustain in February owing to low output and inventory drawdown as demand will likely remain supported ahead of Ramadan.
“Nonetheless, CPO price upside will be capped by its competing oils and gasoil,” it added.
The three-month CPO futures in January registered an increase of 3.3% year-to-date and briefly tested RM4,000 per tonne. Maybank IB Research maintained its CPO average selling price forecast of RM3,700 per tonne for 2024, slightly easier as compared to the average of RM3,810 per tonne in 2023.
This projection was premised on good South American soybean harvest and the anticipated lower CPO unit cost year-on-year.
“By our estimate, Malaysian planters’ unit cost has jumped by 45% to an average of RM2,670 per tonne for the period of 2022 to 2023 compared to the five-year average unit cost of RM1,843 per tonne from 2017 to 2021,” Maybank IB Research said.
“We posit that the sustainable long-term CPO price will always be referenced against producers’ unit cost of production. That said, we expect Malaysian planters’ unit cost to ease somewhat in 2024 relative to 2023 on lower fertiliser cost and improving yields,” it added.
