CPO to remain above RM3,500 per MT in second quarter

KUCHING: The price of crude palm oil (CPO) has been projected to remain elevated at above RM3,500 per metric tonne (MT) in the second quarter of 2021 (2Q21), but it will trend down more noticeably in the second half of 2021 (2H21).

The research arm of Hong Leong Investment Bank Bhd (HLIB Research) believed the price of CPO will start easing from 2Q21 (albeit on a gradual basis) on the back of the absence of weather disruption (as La Nina has already subsided), and improving supply prospects of soybean.

“Nevertheless, we believe CPO price will still remain elevated at above RM3,500 per MT in 2Q21, supported by supply tightness in major edible oils, still-tight edible oil inventory levels for major consuming countries which will sustain near term inventory replenishing activities, competitive CPO price relative to other edible oils and biodiesel mandate in Indonesia, which curbs supply of palm oil,” HLIB Research said.

“CPO price will likely trend down more drastically in 2H21, on the back of better supply outlook for soybean output (particularly, in US and Brazil, which collectively account for approximately 65 per cent of the world’s total soybean output), seasonally higher palm oil output in 2H and demand pullback, when a recovery in supply of major edible oils is in sight amidst the absence of fresh demand catalyst.”

That said, HLIB Research noted that the seasonally higher palm oil output in 2H21 will weigh down on CPO price.

Despite having anticipated labour shortage issue to persist for a while, the research arm believed palm oil production will still come in higher in 2H on the back seasonal factor, which will in turn weigh down on CPO price.