RAM revises CPO price forecast down to RM2,000-RM2,200

RAM Ratings has revised downwards its CPO price forecast to an average of RM2,000 to RM2,200 per metric tonne (MT) for 2019 from RM2,200 to RM2,400 previously.

This comes as CPO prices have been persistently weaker than expected, averaging 17 per cent lower year on year (y-o-y) at RM1,977 per MT in the first seven months of 2019 (7M19).

“Strong production growth and concerns about the impact of unresolved US-China trade tensions on demand for edible oils have been a drag on prices,” RAM highlighted yesterday in a statement.

“On the supply front, both Malaysia and Indonesia continued to register robust production growth. Local CPO production rose 11 per cent y-o-y in 7M19 due to improved yields.

“Indonesian output grew 16 per cent y-o-y in the first half of 2019 (1H19) amid progressive maturing of oil palms into higheryielding phases. In the wider global vegetable oil market, the US Department of Agriculture estimates the supply of vegetable oils to expand three per cent in 2018/2019 and at a slower two per cent in 2019/2020.”

In regard to demand, RAM saw that Malaysia’s crude and processed palm oil exports climbed 15 per cent y-o-y in 7M19, driven by greater demand from India, China and the US. So CPO prices and zero export duties since September 1, 2018 had encouraged increased purchases of the tropical oil.

In addition, India’s reduced import duties on CPO and refined palm oil products, effective January 1, 2019, caused Malaysian palm exports to India to double to three million MT in 7M19.