World Bank estimates better GDP growth in 2018

“The higher palm oil consumption is in line with better economy condition expected for 2018,” it opined, noting that World Bank estimated a better GDP growth in 2018 at 2.9 per cent (against 2.7 per cent in 2017).

It also noted that Indonesia is expected to lead the consumption growth at nine per cent y-o-y or 0.85 million MT to 10.38 million MT in view of the supportive biodiesel mandate in the country.

With the rise in demand, MIDF Research opined that supply growth for palm oil could weaken in 2018. It also believed that the uptrend in production of palm oil would end soon.

“We expect global palm oil production growth to slow down to 4.3 per cent or 2.82 million MT to 68.23 million MT in 2018.

“The minimal growth of 4.3 per cent is likely to be significantly lower than 2017’s 12.3 per cent growth yo-y or 7.19million MT to 65.41m MT in 2017,” it explained, noting that 2017 is a production recovery year from the El Nino which has affected production in 2016.

“In our view, the uptrend for production recovery is coming to an end soon. Note that Malaysia September production of 1.78 million MT represents a minimal 3.8 per cent growth against the first eight months 2017 growth of 13.6 per cent y-o-y to 12.35 million MT,” it added.

As for the plantation sector’s performance for the upcoming third quarter of 2017 (3Q17), MIDF Research expected strong sets of numbers by planters.

Overall, for the average palm oil prices in 2018, MIDF Research upgraded its forecast to RM2,900 per MT from RM2,725 per MT, based on higher soybean oil price assumption, better demand outlook for palm oil in 2018, and weaker supply growth in 2018 after strong recovery in 2017.

“For 2017, we have also increased our average CPO price estimate to RM2,825 per MT (from RM2,725 per MT),” it added.