Vaccination plan to boost plantation industry

by BERNAMA / pic by BLOOMBERG

THE rollout of the national vaccination programme will boost the plantation industry, giving hope that borders will soon be reopened and lessen travel restrictions while bringing back the hotel-restaurant-café (Horeca) demand, Alami Commodities Sdn Bhd said.

MD Ahmed Alami said there is already an increase in the Horeca industry demand, which has started operating after months of lockdown.

“Businesses have resumed and in some countries, the tourism industry has slowly resumed operating and hotels are open too,” he said during a webinar on “Palm Oil: Price trends 2021 — Market expectations and sentiments, organised by Refinitiv and Malaysian Palm Oil Council (MPOC).

However, for the industry to go back to the pre-Covid level, it would likely take some time, Ahmed noted.

“We will have to see how long this vaccine rollout programme will take…it might take two years to fully complete and seven years for this pandemic to really go away.

Ahmed described 2020 as the worst year since the great depression that took place in 1930.

To recap, last year, the crude oil price crashed, followed by other commodities that caused many companies to go bankrupt before reviving at a very slow pace.

In addition, travel restrictions and lockdowns also put the tourism industry to sleep and led to many major global airlines to declare bankruptcy.

On the flip side, as the plantation industry is part of the essential services, it was allowed to operate at full capacity.

Amid tightness in production (due to labour shortage), the crude palm oil price doubled from May 2020 to December 2020.

“Palm oil demand will remain solid for 2021 and the price average to be at RM3,200 per tonne,” he said.

Besides Ahmed, another speaker who participated in yesterday’s event, Refinitiv senior analyst Kian Pang Tan said the higher palm oil prices may curb some demand from price-sensitive markets.

“Besides this, the South America’s soybean output may turn out to be higher than expected, and this will put pressure on crude palm oil (CPO) prices,” he said.

Kian noted that palm oil imports from India and China are expected to rise, thanks to growth in edible oil consumption and a gradual economic recovery and restocking activities. The European Union palm oil imports will likely decline.

MPOC deputy director Faisal Iqbal said Malaysia’s CPO production for 2021 is forecast to increase by 500,000 tonnes to 19.6 million tonnes from the 19.2 million tonnes recorded in 2020.

“Exports of CPO are forecast to increase to 4.8 million tonnes, leaving about 14.8 million tonnes for domestic refining. This would likely result in a CPO supply deficit of at least 500,000 tonnes and will have to be met by imports.

“This supply and demand scenario is likely to create low monthly ending stocks for much of 2021, with low monthly stocks trending below 1.5 million tonnes,” he said, adding that it is a classic scenario for higher CPO prices for the most part of 2021,” he said.