CPO prices may stay at present levels over the next two months

KUALA LUMPUR: Crude palm oil (CPO) prices could continue to trade at present levels of RM2,500RM2,650 per tonne over the next two months, said IOI Corp Bhd chief executive officer Datuk Lee Yeow Chor.

He said on the sidelines of the Invest Malaysia conference that prices could sustain despite CPO industry production being slated to increase.

“This is because now CPO is trading at quite a big discount of US$140 per tonne compared to soybean oil.

“So at this kind of discount levels, CPO is very competitive. I am quite confident that CPO prices will stay for the next two months,” Lee said.

“We (the industry) is presently at a very low palm oil stock level and although production is slated to increase in the next few months, it will be well absorbed by the higher demand,” he added.

If the ringgit strengthens, Lee said CPO prices could trade lower in ringgit terms.

“Any strengthening of the ringgit is due to the weakening of the US dollar. So the US dollar is weak and CPO is sold internationally in the US dollar.

“Thus if the dollar is weak, CPO will be more affordable. It is always a trade off,” Lee said.

He said the company’s cost of production had continuously risen but noted that IOI had several measures in place to mitigate the cost increases.

“The best way to lower production costs is to increase the yields. We are still not satisfied with our current yields and we would like to increase this further.

“We plan to adopt more labour-reducing measures, including through mechanisation with the use of technology,” Lee said.

IOI’s CPO yields are currently at 5.3 tonnes per hectare.

“Necessity is the mother of invention and there will come a time where plantation owners will be forced to implement labour reducing measures.

“We have started to do this and we are progressing at a slow pace,” he said.

Lee also said there was no plan at the moment to expand its oil palm plantation land bank.