April CPO price growth momentum cooled off earlier than expected

This will push other veg-oils and soybean oil prices into a downward trend as supply risk deescalate.

Midf Research

KUCHING: Crude palm oil (CPO) price growth momentum in April had cooled off earlier than expected as it ended the month at RM3,879.5 per metric tonne (MT), which translated to a drop of -9.9 per cent month-on-month (m-o-m).

Average CPO prices during the month under review had grew at a flat m-o-m and y-o-y rate of 0.9 per cent to RM4,254.5 per MT.

In a sector update report, the research arm of Midf Amanah Investment Bank Bhd (Midf Research) guided that they that originally estimated that April’s average CPO price would grow by 4.6 per cent m-o-m to RM4,419 per MT, which was 2023’s resistance level.

The negative variance to their forecast was due to diminishing El-Nino premium risks as the weather phenomenon has been observed to be mild and uneven weather has begun to normalise ahead of the La-Nina event in the second half of the year (2H24).

Additionally, the global oilseed in 2024 to 2025 is also projected to increase by 4 per cent y-o-y to 687 million MT, while soybean production is expected to increase by 6 per cent y-o-y to 422 million MT.

“This will push other veg-oils and soybean oil prices into a downward trend as supply risk deescalate,” said the research arm.

In a separate report, analysts at Kenanga Investment Bank Bhd’s research arm (Kenanga Research) added that they reckon CPO prices will also see some easing in 2Q from strong South American soyabean harvest and fading effects from the Hari Raya and Indian election-related orders.

Looking ahead in May, Midf Research forecasts that the average local CPO delivery prices will close 7.2 per cent m-o-m lower to RM3,946.7 MT while CPO prices will average at RM3,600 per MT for the whole year.

Meanwhile, Kenanga Research hold a more optimistic view as they CPO prices to trade sideways CPO at RM3,800 per MT in 2024 to 2025.

On the bright side, planters are expected to enjoy higher margins moving forward as there has been a significant 15 and 5 per cent y-o-y fall in fertiliser and energy prices, respectively.

Palm kernel (PK) and palm kernel oil (PKO) prices also seem to be bottoming out as they have been rising m-o-m since December 2023.

“Higher PK prices help lower CPO cost as proceeds from selling PK is ‘credited’ or offset against CPO extraction cost,” said the research arm.

“Coupled with flattish CPO prices of RM3,800/MT, upstream margins should be better than a year ago,” said the research arm.*