CPO prices seen to remain stable

Consultant expects price range of RM2,200 to RM2,300

PETALING JAYA: Crude palm oil (CPO) prices are expected to remain stable, at least until the first half of next year, pending any official announcements from India.

Sources said the offtake of Malaysian palm oil was still stable and with demand still exceeding supply, CPO prices would still be holding steady.

Without a firm word directly from the Indian government, the market is deeming the potential boycott by Indian importers on local palm oil as mere speculation.

CIMB Investment Bank’s regional head of plantation research Ivy Ng said excluding potential impact on demand from speculation of the boycott, CPO prices should recover next year, averaging at around RM2,300 per tonne.

“We cannot put that (boycott speculation) into our forecast because we don’t know what’s the outcome. It’s speculation at the moment.

“Our prices will recover next year, simply on the back of weaker palm oil supply growth coming from Indonesia and potentially weaker growth from Malaysia and this is due to the weather, which has been dry, coupled with the low fertiliser input.

“We do expect demand to be supported by the biodiesel mandate, where Indonesia seeks to promote B30 and Malaysia, the B20,” she told Starbiz.

Rather than supply, Ng said the greater concern moving forward is demand, as some of the issues that have taken place over the last 12 months may affect supply growth going into 2020.

She noted that the incremental supply next year would not be so significant like what had happened last year, causing prices to tumble.

“We don’t think supply is so great that it’s going to cause price changes to be negative, but more on the concern of demand.

“You have the biodiesel mandate that is subject to enforcement and implementation, and then you have the United States and China trade war that could affect global growth.

“There are also trade issues, various trade policies and changes in duties and taxes that may affect demand, depending on what changes,” she said.

Palm oil industry consultant M.R. Chandran said India would not want to get into a trade dispute with Malaysia for a food product at the moment, considering the current world economic situation.

He stressed that Malaysia and India have a long trade relationship and it was Malaysia that had developed the palm oil market in India, before Indonesia took over the major share.

“I doubt very much there would be a move by India to curtail shipments from Malaysia.

“It’s sort of an annoyance but there are trade implications to all these, and I’m sure not only the Primary Industries Ministry but also the International Trade and Industry Ministry would address this,” he said, adding that the potential threat has caused much uncertainty, both for the Indian buyers and Malaysian exporters and this was why palm oil prices are not moving up when they should be.

Chandran said the industry is now moving towards a period where the market sees slightly lower production and even with the incremental production from Malaysia and Indonesia, the demand actually outstrips the supply.

Taking that into consideration, he is expecting CPO prices to hover around RM2,200 to RM2,300 a tonne next year.

Moving towards the last quarter of 2019, Chandran said as long as prices can hold at RM2,200 and above, it would be comfortable for the industry players.

Meanwhile. Bernama reported that the Malaysian Palm Oil Association is also of the view that there are positive signs of palm oil prices moving up due to the lower stock level in the world’s two largest producers – Indonesia and Malaysia.

CEO Datuk Nageeb Wahab noted that less fertiliser used in plantation areas as well as the haze problem have resulted in low yields, while demand has continued to grow.

He said the CPO price should stabilise at RM2,300 to RM2,500 per tonne next year, which is reasonable for smallholders.

Nageeb also hoped that India would continue to source its palm oil from Malaysia, given their strong bilateral trade relationship and that they are mutually reliant on each other.

Earlier this month, Reuters reported that the Indian government was “looking for ways to limit palm oil imports and may place restrictions on other goods from the country”, quoting government and industry sources.

This was said to be in retaliation to Prime Minister Tun Dr Mahathir Mohamad’s statement at the United Nations General Assembly last month that India had “invaded and occupied” Jammu and Kashmir.

India is the world’s largest importer of palm oil with a total of 8.8 million tonnes of palm oil imported last year – 2.1 million tonnes from Malaysia and 5.98 million tonnes from Indonesia.