CPO prices expected to decline before stabilising
KUALA LUMPUR: Crude palm oil (CPO) prices are expected to decline before stabilising as consumers shift their preferences to cheaper palm oil products compared to soybean oil products.
Rabobank head of agri commodity markets research Stefan Vogel said the price gap between soybean oil and CPO narrowed last year as CPO prices climbed due to the El Nino weather phenomenon.
CPO prices rose around 40% last year to more than RM3,200, while soybean oil increased 14% to RM4,533.
However, Vogel said the gap between CPO and soyabean oil prices would widen again due to higher palm oil production that would result in CPO prices declining.
“The price gap between both palm oil and soyabean oil is expected to widen to around US$100 per tonne this year compared to US$40 per tonne last year,” he added.
However, Vogel noted that the decline in CPO prices would result in a shift of consumer preferences to palm oil from soyabean oil and this shift would be sufficient to support CPO prices by the end of the year.
“We think with the expected lower prices of palm oil, you would see a fraction of consumers shifting back to palm oil products which is good for demand and would support CPO prices,” he added.
Vogel estimated CPO prices to decline to RM2,700 per tonne in the third quarter and to RM2,550 in the fourth quarter this year. The improvement in CPO production will mean prices will hover around RM2,500 to RM2,700.
He pointed out that palm oil demand would be boosted should the United States revamp the country’s national biofuel programme to provide new incentives for biodiesel production as soyabean oil prices will rise.
According to Reuters, US President Donald Trump may revamp the programme.
“With the expected increase in price level of soyabean oil, it would help shift demand back to palm oil products. It is actually beneficial for prices of CPO if Trump increases the use of soyabean oil and implements the intended policy,” he said.