CPO likely to stay above RM4,000 per tonne

PETALING JAYA: Analysts expect crude palm oil (CPO) to stay lofty above RM4,000 per tonne in the immediate term, but the current price may have peaked for this year.

On April 3, the benchmark CPO futures contract price hit a year-to-date high of RM4,579 per tonne, which reflected the near term tightness in palm oil inventory.

Maybank Investment Bank Research (Maybank IB Research), in its latest report, said CPO prices may have peaked due to a stronger pick up in palm oil output from May and hit its seasonal peak in the third quarter 2024 (3Q24).

“This will pressure CPO price on the downside once the market anticipates supply is normalising,” it added.

Other factors include the CPO price that is trading at narrowed price discounts against other major competing vegetable oils, while against gas oil in Rotterdam, it continued to trade at a premium of US$232 per tonne on April 12, while South America’s soybean harvest is also underway.Hence, CPO price could become bearish towards mid-year on seasonal output recovery, noted Maybank IB Research.

It has maintained a “neutral” call on the plantation sector with recommended “buys” within the sector, namely Bumitama Agri Ltd and Sarawak Oil Palms Bhd.

As for the Malaysian Palm Oil Board’s March palm oil statistics, Maybank IB Research said strong exports that outpaced production growth led to lower palm oil stockpile at 1.71 million tonnes, which is at its 10-month low.

RHB Research said: “Even if the export momentum continues, we expect stock levels to remain below the two-million-tonne mark in the next few months as the peak output month is likely to be in 3Q24, barring any unforeseen weather issues.”

Going forward, the research firm said it expects production to slowly improve in the next few months, with a bigger spike from May to June.

As for exports, demand could also pick up gradually as restocking activities continue.“However, this will remain to be hampered by switching activities, as CPO is still trading at an unusual premium to sunflower oil of US$68 per tonne and at a narrower discount of US$133 per tonne to soybean oil, making it less attractive to importers,” RHB Research added.

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