CPO price to be supported at RM2,500 per MT — Analysts
KUCHING: Contrary to Dr James Fry’s (LMC International Ltd chairman) prediction that crude palm oil (CPO) price could fall to RM2,250 per metric tonne (MT), analysts believe that should the CPO price decline, it would be supported at RM2,500 per MT.
Of note, earlier this week during the Programme Advisory Committee (PAC) Seminar which is organised by Malaysia Palm Oil Board (MPOB), Fry opined that CPO price should fall to RM2250 per MT by year end.
He explained that Malaysia CPO production should experience strong recovery in 2017 by five million MT to 22.5 million MT and as a result stocks level should surge to 2.5 million MT.
Other assumption is that Brent crude oil stays at around US$55 per barrel and good production for other vegetable oils (rapeseed oil, soybean oil and sunflower oil).
However, MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) believed that CPO production should increase significantly as palm trees are recovering from El Nino and they tend to produce more
Having said that, we also noticed that Indonesia biodiesel industry has consumed more palm oil as the CPO – Brent premium shrink to a decent level MIDF Research
after having a resting period.
It noted that in February 2017, Malaysia CPO production has increased by 21 per cent year-onyear (y-o-y) to 1.26 million MT and the research team expected the trend of higher production y-o-y to continue at least for another three months.
“Having said that, we also noticed that Indonesia biodiesel industry has consumed more palm oil as the CPO – Brent premium shrink to a decent level,” it said, noting that Malaysia import of palm oil has declined 44 per cent month- on- month ( m- o- m) to 40,331 MT and we think that this is a signal of increased usage of biodiesel in Indonesia.
Meanwhile, MIDF Research lowered its March inventory level growth forecast to five per cent (from 11 per cent previously) as export performance has been better than expected.
“Note that cargo surveyors data shows that Malaysia palm oil export has improved by seven per cent in March and this is a significant improvement against the 25 per cent m-o-m decline in the first ten days of March. For production growth we are expecting 15 per cent increase in line with seasonal pattern,” it added.
Overall, the research arm reiterated its ‘neutral’ view on the sector with 2017 average CPO price of RM2,725 per MT unchanged.