CPO prices to stay bullish
PETALING JAYA: Crude palm oil (CPO) prices are expected to stay bullish this month on supply concerns and higher biodiesel mandates from Malaysia and Indonesia.
Yesterday, the third-month benchmark CPO futures contract for February on Bursa Derivatives Exchange breached the RM2,800 per tonne mark, but settled at RM2,796 per tonne at the close.
CGS-CIMB in its latest report has projected that CPO to be traded between RM2,500 and RM2,800 per tonne in December.
It noted the average CPO price rose 18% month-on-month (m-o-m) and 36% year-on-year (y-o-y) to RM2,493 per tonne last month.
“This brings the 11-month CPO average price at RM2,041 per tonne, which is broadly in line with CGS-CIMB’s average CPO price forecast at RM2,100 per tonne, ” it added.
The research unit pointed out that the m-o-m improvement for CPO price was driven by optimism on higher biodiesel mandates from B20 to B30 in Indonesia and from B10 to B20 in Malaysia.
This is followed by anticipation of stronger uptake from China ahead of Chinese New Year festival by late next month as well as higher palm oil shipments ahead of the export tax resumption in Indonesia and Malaysia by Jan 1,2020.
Meanwhile, the Malaysian Palm Oil Board is expected to release the official palm oil statistics i.e. stocks, exports and production for November on Tuesday (Dec 10) next week.
CGS-CIMB in its preview estimated that local palm oil stocks to fall to its lowest level in November since 2016.
Findings from a survey of palm oil areas by the CIMB Futures team revealed that the local CPO output probably fell by 12% m-o-m to 1.58 million tonnes.
Palm oil exports will also decline by 5% m-o-m but grow 13% y-o-y based on the average export statistics by cargo surveyors, ITS and Amspec, it added.
CGS-CIMB said: “Overall, we estimate that local palm oil inventory will fall by 8% m-o-m and 28% y-o-y to 2.16 million tonnes at end-November 2019.”
Over the past seven years, local palm oil inventory on average grew by 7.1% m-o-m in November.
The research unit also said that its projected CPO output for November was 14% lower y-o-y, suggesting that the fresh fruit bunch (FFB) yields have continued to weaken due to dry weather experienced in parts of the region, insufficient fertilising and ageing estates.
“We forecast that the total local CPO output will rise by 3.9% to 20.3 million tonnes for 2019, ” it added.
Export-wise, CGS-CIMB projected a 5% drop m-o-m to 1.56 million tonnes in November based on ITS and Amspec estimates.
“This is a lower decline compared with the historical average m-o-m fall of 9.5% over the last five years in the month of November.
Based on Intertek estimates, palm oil exports to China grew by 56% m-o-m in November, but this was more than offset by weaker exports to Africa down 48%, India dropped 8% and the EU eased 27%.
The research unit said: “The strong demand from China could be due to buying ahead of the Chinese New Year festival and lower domestic soybean oil supplies given the slower domestic crushing activities.”
Source: TheStar