PALM OIL MAY HIT RM3,000 MARK
Price will likely increase amid expected shortage of supply, says MPOC exec
ASLOWDOWN in crude palm oil (CPO) output due to heavy rains in the second half of the year — the typical peak production period for Malaysian palm oil — may push the commodity prices to the RM3,000 mark by year-end, says an industry expert.
CPO was traded at an average of RM2,711 per tonne as at October 12.
Malaysian Palm Oil Council’s (MPOC) marketing and development manager Mohd Izham Hassan said total CPO production in Malaysia was expected to settle at 19.3 million tonnes this year, lower than the council’s initial forecast of between 19.8 million and 20 million tonnes.
“Fundamentally, the price should increase as there will be a shortage of supply. I believe the price will stabilise further as it is still undervalued and may touch RM3,000 per tonne before yearend,” said Izham.
Palm oil output in Malaysia, the world’s second-largest producer and exporter, reached its yearhigh in July, totalling 1.83 million tonnes before slipping to 1.81 million and 1.78 million tonnes in August and last month, respectively.
This was despite a climb in stocks for a third month in September, which saw inventory breach the two-million-tonne mark for the first time in well over a year boosted by weaker-thanforecast exports, according to Reuters.
Although the peak period typically runs from July to November, Izham said palm oil output would not likely record a new high this year as production was hampered by heavy rainfalls in the last two months, which caused flash floods across the country including in Melaka, Penang and Sabah.
The average oil extraction rate (OER) of Malaysian fresh fruit bunches (FFB) stands at around 20 per cent but excessive rains tend to increase the moisture content of oil palm fruits causing OER to drop to 17 per cent during the peak period, he said.
“We believe that the peak is past and expect total volume for the second half of the year to be lower than the first half,” he told NST Business on the sidelines of the 10th Global Oils and Fats Forum held by MPOC, here, recently.
Despite the anticipated rally, Izham said CPO prices were not expected to increase “too fast” as they were also impacted by movements of other edible oils especially soyabean — palm oil’s nearest rival, as they compete for a share in the global vegetable oils market.
While palm oil remains the world’s cheapest vegetable oil, prices of soyabean oil have become increasingly competitive over the years as annual output continues to rise.
However, Izham said the global outlook for palm oil remains firm in the foreseeable future with exports to its two major consumers namely India and China expected to surge.
“Growing population in these two countries means bigger consumption of palm oil,” he added Izham after presenting a paper on “Palm Oil Market Outlook and Trends 2017 and Beyond” at the forum.