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PETALING JAYA: Crude Palm Oil (CPO) prices are expected to rise due to recovery in demand from India and China, as well as a decrease in supply due to labor shortages.
CGS-CIMB head of research Ivy Ng expects CPO prices to average around RM2,500 per tonne this year, which is the highest since 2017, as demand is expected to increase and supply to remain low. pressure due to labor problems and dry weather.
This was despite the collapse in commodity prices that saw CPO prices drop below RM2,000 per tonne in March due to the Covid-19 outbreak and motion control orders (MCO) in major countries, especially India and China.
“This year is one of the most volatile for CPO prices. Earlier this year, crude palm oil prices soared above RM3,000 per tonne due to supply concern in Malaysia due to weak production in the last quarter of 2019 and the first quarter of this year, as well as Indonesia’s last biodiesel mandate.
“Then the Covid-19 outbreak in March drove prices below RM2,000 per tonne due to supply chain and MCO disruptions in many countries around the world.
“The CPO recovered stronger than expected in May. In an average of nine months, crude palm oil (CPO) prices averaged RM2,546 per tonne, which is higher than the 10-year average of RM2,530, “he told reporters in a Virtual Press Conference: The Annual Price Outlook for Palm and Lauric Oils Conference and Exhibition (POC).
LMC International Director for Southeast Asia Dr Julian Conway McGill expects crude palm oil prices to weaken from their current level of over RM3,000 per tonne as China is likely to slow down its purchasing .
“We expect the price of crude palm oil (CPO) to average 2,600 yuan in the next six months, as China is likely to opt for soybean oil if crude palm oil prices remain below above 3,000 yuan, “he said.
He added that low global diesel and crude oil prices would also push vegetable oil down as many countries suspend their biodiesel plans.
In particular, Malaysia is the second largest producer of palm oil in the world after Indonesia. Malaysia contributes 26% of world palm oil production, while Indonesia contributes 58%.
Ng added that dry weather and labor shortages would also lead to lower CPO production from Indonesia, further driving CPO prices this year. He said prices are likely to rise more than expected, depending on the development of the La Niña weather phenomenon.
The Malaysian Palm Oil Association said Malaysia could lose around 25% of production due to a labor shortage, as the Covid-19 pandemic has restricted the movement of foreign workers, while some foreign employees have been repatriated home.
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