By SHAHEERA AZNAM SHAH / Pic By BERNAMA
PALM oil price rally is expected to continue this year, said Malaysian Palm Oil Council CEO Datuk Dr Kalyana Sundram (picture) as it is seen as undergoing a “corrective period” to the commodity.
“This year, the consumption of all competing oils is going to overtake the supply in the medium-to long term. There is going to be a shortfall made up by the existing stock.
“Right now, there are price changes between all of the oils, and the ability of seed oils to continue its rally in the longer term appears to be committed. If anything, the rally is stabilising the market,” he said at the Palm Oil Economic Review and Outlook Seminar 2020 in Kuala Lumpur yesterday.
Kalyana added that the biodiesel mandate by the Malaysian and Indonesian governments, as well as the anticipated slow growth of palm oil production will drive price hike further.
On the impact of the recently signed US-China trade deal, Malaysian Palm Oil Board (MPOB) deputy DG (services) Balu Nambiappan said the agreement could reduce palm oil buying from China due to its commitment to increase soybean oil import from the US.
The board, he said, will have to conduct a study on the quantum of the impact to Malaysia’s palm oil industry as the positive development of the trade deal is still at an early stage.
“The US-China tension has benefitted palm oil producers in the early stages of conflict before the two countries reached an agreement.
“Now, the signing of the Phase 1 trade deal will lead to implications such as increasing the uptake of US soybean from China, and potentially impact the intake of palm oil,” he said.
Under the Phase 1 trade deal, China pledged to purchase more US farm products, including soybeans, among the wider US$200 billion (RM812 billion) package by 2021.
Meanwhile, the MPOB expects palm oil exports to marginally fall this year following a buying restriction from India.
MPOB DG Dr Ahmad Parveez Ghulam Kadir said the total export volume is expected to reduce by 2.5% to 18 million tonnes from 18.47 million tonnes at the end of 2020.
According to him, Malaysia had an advantage of lower import tax for refined palm oil compared to Indonesia under the Malaysia- India Comprehensive Economic Cooperation Agreement.
“But recently, the tax has been standardised and now the structure for Malaysia and Indonesia is the same. That is why we are going to be in a greater competition with Indonesia on exporting our palm oil to India,” he added.
On total industry outlook, he said the board expects the production of crude palm oil (CPO) to rise 1.7% to 20.2 million tonnes this year against 19.86 million tonnes in 2019, while projecting a higher industry revenue of RM78 billion, a 21% increase due to the anticipation of firmer CPO prices.
“We began the year with low opening stocks, firmer palm oil prices and strong palm oil demand, 2020 is predicted to be better,” he said.
Still, palm oil inventory is expected to rise 14.4% to 2.3 million tonnes due to the anticipated lower demand from India.
“However, it is not clear how much is India going to reduce its imports of refined palm oil as it could mean that there is a maximum volume capped for the import volume,” he explained.
Ahmad Parveez added that the CPO price is expected to average at RM2,700 per tonne in 2020, tracking the firmer soybean oil price coupled with an anticipated lower production.