MALAYSIA ( B – Trams / RHB Research ): Palm OIl Industry experts are Forecasts for this year, given the fundamentals that led to the perfect storm for the current price rally and the uncertainties over the Russia-Ukraine conflict.
This is based on RHB Research’s latest review of the three-day Palm & Lauric Oils Price Outlook Conference and Exhibition (POC 2022) organised by Bursa Malaysia, which ended on Wednesday.
The research house said:
- “Volatility and uncertainty were common features, with most speakers at POC 2022 unable to predict supply and demand projections with much accuracy.
- “Those that did, gave a wide range of average price forecasts from RM4,000 to RM9,000 per tonne level.”
All 11 industry experts at POC 2022, however, unanimously agreed that CPO prices will remain high in the short term, driven by the Russia-Ukraine war impact.
RHB Research said most speakers concurred that the upside risks to CPO prices include a prolonged war, no resolution to Malaysia’s labour shortage issue, further extreme climate conditions and no changes to biofuel mandates globally.
The main downside risk to prices that need to be monitored would be the end of the Russia-Ukraine
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“This determines the extent of the damage to Black Sea sunseed and soybean crops.
“Additionally, the impact of demand rationing also needs to be monitored, as inflationary pressures are causing severe woes in India, Pakistan and China,” said RHB Research.
Most speakers at POC 2022 also highlighted that the best way to address the current market shortage is by cutting the biofuel mandates, which will release palm oil supply for food demand.
RHB Research, which maintained a “neutral” call on the plantation sector, said its CPO price assumptions of RM4,300 per tonne for 2022 and RM3,600 per tonne for 2023 will likely need to be revised further.
“This is given the factors we have seen affecting prices such as the Russia-Ukraine war and changes in regulations. We prefer to revise this at a later stage, once prices are less volatile,” it added.
RHB Research noted that CPO prices had spiked again by over RM600 per tonne on Wednesday on Indonesia’s sudden increase in domestic market obligation (DMO) to 30% from 20% previously.
“Indonesian players will have to suffer from higher volumes of output sold at the DMO price of 9,300 rupiah per kg or RM2,700 per tonne,” it noted.
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