Bullish outlook for palm oil sector in 2020
January 6, 2020
KUALA LUMPUR: The Malaysian palm oil industry is bullish on this year’s outlook for the sector amidst flattish production, depleting global vegetable oil inventories and growing demand for the commodity.
The country’s palm oil production is projected at 19.3 to 19.5 million tonnes this year, lower than last year’s forecast of 20 million tonnes, which augurs well for the price to climb higher.
“Beginning March 2020, stocks of world vegetable oils are likely to deplete, making the price outlook (for palm oil) bullish,” according to the Council of Palm Oil Producing Countries (CPOPC) executive director Tan Sri Yusof Basiron.
“The golden crop is expected to have a stellar performance throughout the year,” he said in his Palm Oil Supply and Demand Outlook 2020.
Research houses echoed Yusof’s optimism and noted that the worst is over for the plantation industry while sharing the crude palm oil’s (CPO) price assumption of between RM2,600 per tonne and RM2,700 per tonne for this year.
At this price, the commodity could still be well supported with demands from key markets like China and India.
Analysts are also hopeful that a higher CPO price would lift the equity market since many of the country’s big plantations companies are listed on Bursa Malaysia.
“They have the potential to lift the index higher but we must be wary of the higher ringgit that could make the palm oil expensive, reducing export prospects,” Singapore- based Palm Oil Analytics owner and co-founder Dr Sathia Varqa told Bernama.
Yusof said with China’s soybean crushing activity and imports of rapeseed and rapeseed oil expected to fall, palm oil stands a big chance to capitalise on the market.
“China has turned out to be the best importer for palm oil in 2019 and will continue to be so in 2020 due to edible and industrial demand and together with sunflower oil, it (palm oil) will replace soybean oil in China,” he said.
A drawn-out trade war between Beijing and Washington would also benefit palm oil exports to China.
“Although US-China has an agreement in principle on Phase One of their trade deal, the devil is in the details. No surprise if the deal fizzles out. As of now any deal will be supportive for the US soy complex and this will spill over to support higher palm prices,” Sathia said.
He said palm oil export into China is expected to touch six million tonnes in 2019 and seven million tonnes in 2020.
Meanwhile, India is set to import 16.3 million tonnes of edible oil for the 2019/2020 marketing year which began on Nov 1, 2019, compared with 15.6 million tonnes of imports in the previous year.
Of the total amount, palm oil imports contributed 9.9 million tonnes, slightly higher from 9.5 million tonnes recorded in the previous year. So far, demand from India has been strong despite some glitch late last year when Indian importers planned to stop buying palm oil from Malaysia and shifted their attention to Indonesia, another major producer of the commodity. The industry also welcomed the recent decision by New Delhi to slash import taxes on crude and refined palm oil from Southeast Asian (ASEAN) countries following a request from suppliers which could potentially lead to India increasing its palm oil imports in the coming months.
The duty on crude palm oil was lowered to 37.5 per cent from 40 per cent, while a tax on the refined variety was cut to 45 per cent from 50 per cent.
“The reduction in import taxes will see increased buying momentum from India this year at the back of escalating prices. But the difference between a palm and soft oils will still be a deciding factor in buying palm or other oils,” Sathia said.
Beginning March 2020, stocks of world vegetable oils are likely to deplete, making the price outlook (for palm oil) bullish. Tan Sri Yusof Basiron