CPO PRICE EXPECTED TO STAY HIGH
Global production estimated to shrink 20pc to 25pc, says ISTA Mielke director
GLOBAL palm oil production is projected to shrink between 20 and 25 per cent in five to 10 years, dragged down mainly by the cyclical weather pattern, China’s trade policies and the Covid19 pandemic.
ISTA Mielke GmbH (Oil World) executive director Thomas Mielke said potential export restrictions by some governments to curb food inflation could discourage producers from raising production.
“Labour shortage and production losses are the major constraints at many plantations. Other factors include reduced fertilisers, ageing plants and lack of replanting activities,” he said at the virtual Palm and Lauric Oils Price Outlook Conference 2021 yesterday.
In his session on “Global Supply, Demand and Prices of Edible Oils — Outlook 2021”, Mielke said the consumption of edible oils in developing countries are affected by the current high crude palm oil (CPO) price.
According to the Bursa Malaysia Derivatives, palm oil price stood at RM3,930 for June delivery.
Mielke said the skyrocketing palm oil price has triggered the rationing of edible oil consumption.
He expects the CPO price to stay elevated and above average throughout the year, but would weaken if the global production of 10 oilseeds rebounds this year and next year.
This would be on the assumption of higher plantings, normal-to-favourable weather and global production surplus.
He said palm oil production, which drastically dropped last year, has shown limited recovery this year and could not improve if the labour shortage is not resolved.
“Palm oil became the most important vegetable oil despite covering only eight per cent of the total planted edible oil cultivation.
“Palm oil production has lost its growth momentum. After the setback, the recovery this season would not bring it back to the level two years ago. It is unprecedented as the growth is considerably less than what we have expected.”
This said, the world production of palm oil is likely to grow by 3.2 million tonnes in September or October.
Indonesia will likely add production capacity by 3.3 million tonnes while Malaysia may reduce it by 0.5 million tonnes.
“Low opening stocks at the beginning of the season are curbing the growth in world supply of palm oil by 0.7 million tonnes.”
He said the prospects of only a moderate recovery in palm oil supplies and consumption will limit the price decline for the remainder of this year.