MPOC: Palm oil price outlook revised higher

Current price has already surpassed MPOC’s previous prediction, says MPOC CEO

by FARA AISYAH/ pic by BLOOMBERG

THE Malaysian Palm Oil Council (MPOC) has revised the price outlook for palm oil in the year to a high of RM2,994 per metric tonne (MT) from a RM2,594 per MT announced last month.

CEO Datuk Dr Kalyana Sundram said the current price has already surpassed MPOC’s previous prediction.

“We are managing our local stocks pretty well. Malaysian palm oil output in 2020 is expected to reach 19.6MT, and the global stock usage ratio is about 14.68% (which indicates that price could further increase).

“As a result, we increased the price outlook going into next month. The average for the year is expected to be much higher compared to what we witnessed in 2019,” he said at the Market Recovery After Pandemic and Prospects of Further Growth webinar yesterday.

According to MPOC, the predicted high is achievable if Malaysia and Indonesia proceed with their implementation of biodiesel blending mandates as planned in 2020.

In addition, Indonesia recently launched its B100 on a trial basis. Other factors, including lower oilseed production which is anticipated in Europe in the coming season, are also expected to contribute to the increase.

MPOC’s outlook for the average price for the year is RM2,573 per MT from RM2,337 per MT previously, if the current scenario of production, consumption and demand remains unchanged.

The forecast low for 2020 is RM2,152 per MT from RM2,080 per MT last month, should there be a shift in market elements such as lower crude oil prices, political standoffs between global economic powers or a downturn in demand from major consuming countries, including India, China, the European Union (EU) and the US.

However, MPOC stated that market volatility will be a key factor as any change in fundamental factors will have a large impact on price.

Refinitiv senior analyst for Agriculture Research Dr Tan Kian Pang said the crude palm oil (CPO) futures are expected to test the RM2800 level by the end of this year due to many factors such as key export destinations, which are replenishing stocks and preparing for upcoming festivals.

“Malaysia’s lower CPO export prices versus Indonesia could boost more shipments for Malaysian palm oil.

“Indonesia’s determination to implement the B30 mandate, resumption of Malaysia’s B20 mandate in September and potential recovery in crude oil prices would be supportive of CPO prices,” he said during the webinar.

Tan said the impacts of prolonged dryness during 2019 to the first quarter of 2020, lower fertiliser application, labour shortage and flooding could lead to weaker production through October.

If verified, he said, CPO production would be lower than 19MT for 2019 to 2020.

He added that narrowing spread between soybean oil and palm oil may prompt some buyers to switch to soybean oil purchases.

Tan said concerns over the rising Covid-19 cases, global economic slowdown and the US-China trade war could weigh on the palm market.