KUALA LUMPUR: Crude palm oil (CPO) prices may continue to be robust, contrary to Fitch Ratings expectations, if the La Nina weather pattern exacerbates the dry conditions in the Americas, affecting soybean yields.
Fitch said another factor was the labour crunch in Malaysia.
Malaysia relied on workers from countries such as Indonesia and Bangladesh for the majority of its plantation workforce, the firm noted.
The government imposed a freeze on hiring of new foreign workers until December 2020, which could delay palm fruit harvesting ahead of the peak production season that starts around September.
Minus these and as yields and output increase, Fitch said CPO prices weere likely to decline in the next few months.
Malaysian benchmark CPO spot prices have averaged around US$645 per tonne so far in the third quarter of 2020 and around US$600 per tonne in 2020 to date.
Fitch’s expected higher yields and output will be due to gradual realisation from better weather conditions and seasonality.
“Yields of fresh fruit bunches per unit of mature plantation area fell by an average of 10 per cent in the first half of 2020 based on data from seven companies.
“However, yields are gradually picking up due to better rainfall since late last year,” it said.
Fitch added that a majority of the companies analysed had higher yields in the second quarter of 2020 year-on-year and month-on-month, and the improvement was likely to strengthen in the second half.