Mixed views on CPO price outlook this year

Covid-19 pandemic influencing global consumption

KUALA LUMPUR: Industry experts have mixed views on the crude palm oil (CPO) price outlook for this year due to the impact of Covid-19 pandemic influencing global consumption.

Following the recent Palm Oil Internet Seminar hosted by Bursa Malaysia and Malaysian Palm Oil Council (MPOB), Publicinvest Research said the industry price forecasts ranged from RM1,800 to RM2,500 per tonne, compared with the average price forecast of RM2,300 per tonne this year.

“We see CPO prices staying in the range of RM2,200 to RM2,300 per tonne for the second half of this year, given the higher inventory levels due to the seasonally higher production level,” the research unit said in its latest report.

Year-to-date, the average CPO price is around RM2,481 per tonne.

From a positive perspective, the research house noted that MPOB believeds CPO prices could potentially hit RM2,500 per tonne this year, driven by the resumption of B20 programme – a fuel mixture of 20% palm oil and 80% petroleum – as well as the export tax exemption for CPO, crude palm kernel oil and refined, bleached, deodorised palm kernel oil.

On the flip side, industry expert Dr James Fry has a bearish view on the CPO price outlook for this year.

He forecast that the local palm oil stocks could surge by as much as 50% to 3 million tonnes by year-end.

Despite the mixed outlook by most industry experts, Publicinvest Research said key drivers that could impact palm oil price movement this year would largely depend on the oil price movement as it played a vital role in biodiesel demand as well as the prolonged impact of Covid-19, as slow economic recovery could drag palm oil demand.

Besides that, it pointed out the recent ban on foreign labour recruitment in all sectors until end-year would be a “big hit” to the labour intensive plantation sector, as foreign labour made up 84.1% of the total workforce.

“Majority of them are harvesters and collectors (38%) and field workers (33%), considered as tough jobs for the locals,” the research house said.

Given the lack of re-rating catalysts, Publicinvest Research is keeping a “neutral” call on the plantation sector.

“We only favour Sarawak Plantation Bhd, given its double-digit fresh fruit bunch (FFB) production growth, attractive forward priceto-earnings ratio of 13 times and room for FFB yield improvement on the back of increasing harvestable area,” it said.

“We see CPO prices staying in the range of RM2,200 to RM2,300 per tonne for the second half of this year”. Publicinvest Research