DEMAND for crude palm oil (CPO) exports could turn sluggish moving forward and is expected to trade between RM3,400 and RM4,400 per tonne until the first quarter of 2023 (1Q23).

Although palm oil end-stocks in Malaysia surged to 2.4 million tonnes in October 2022, BIMB Securities Sdn Bhd said it was cautious on export demand moving forward.

Palm oil end-stocks in Malaysia remained elevated in October 2022 after jumping by 3.7% month-on-month (MoM) and 31% year-on-year (YoY) — the highest since September 2019 — to 2.4 million tonnes.

Nonetheless, BIMB Securities said it was cautious on export demand moving forward as it believes demand could turn sluggish post festivities.

This, it said, will be on top of stiff competition from Indonesia and from other edible oils “given our major importing countries are on a belt-tightening drive due to inflationary environment, unfavourable exchange rates and elevated level of global commodity prices”.

“As such, end of year stocks could reach 2.4 million to 2.8 million tonnes,” it explained.

Beyond October 2022, it noted that the widening discount of price differential between palm oil price and soybean oil price is set to keep the CPO supported.

Hence, the research house said, “CPO price for the rest of 2022 until 1Q23 is expected to trade within a range of RM3,400 to RM4,400 million per tonne.”

It added that tightness in palm oil supply and strengthening in other edible oils prices supply from Malaysia and Indonesia due to lower yield from weather issues, as well as slow return of foreign workers and prolonged Russia-Ukraine geopolitical tension among the reasons for the weaker price.

BIMB Securities maintained a ‘Neutral’ call on the sector with forecast 2023 CPO price average of RM3,500 per tonne, a marked slowdown against 2022’s average of RM5,000 per tonne. 

To recap, CPO prices in the derivatives market for the month of October traded mostly sideways, tracking the price movement of the soybean oil market amid concerns over slower demand and higher stocks and palm oil supply from Malaysia and Indonesia, given that the sector is currently in the seasonally higher palm oil productive month.

Palm oil price was well supported with the average CPO price at Bursa Derivatives Market closing relatively higher at RM3,861 per tonne or a 4.6% MoM increase whilst the CPO price for local delivery settling lower to an average of RM3,682 per tonne in October against RM3,736.50 per tonne recorded in the previous month. 

As for the January to October 2022 period, the average CPO price of RM5,346 per tonne was higher by RM1,086 per tonne or a jump by 26% YoY. — TMR / pic Bernama