CGS-CIMB: CPO price to remain firm at RM3,400 to RM4,000 July
Published on: Saturday, July 10, 2021
Kuala Lumpur: CGS-CIMB Futures Sdn Bhd projects crude palm oil (CPO) price to remain firm at RM3,400 to RM4,000 per tonne in July 2021, amid low global edible oil inventories and workers shortage in Malaysia.It, however, still expects the CPO supply to recover in the coming months but at a slower rate due to labour shortage woes.
“Despite rising CPO price, Malaysian planters’ share prices are under pressure due to concerns over forced labour allegations.
“The recent cut in export levy by Indonesia is a slight negative as well,” it said in a note Friday.
The futures trading firm said that average CPO price fell by 16 per cent month-on-month (m-o-m) but grew 120 per cent year-on-year (y-o-y) to RM3,831 per tonne in June 2021, the first m-o-m decline this year due to Indonesia’s plans to cut its export levy and weaker competing edible oil prices.
On Malaysia’s palm oil exports, it estimated exports to grow by nine per cent m-o-m and decline by 19 per cent y-o-y in June 2021 to 1.38 million tonnes, likely due to stronger exports to China.
It said palm oil has been attracting good demand due to the wide price discount against soybean oil, which stood at US$393 (US$1=RM4.18) per tonne on July 1.
“However, this is partly offset by concerns of weaker demand due to the increase in new Covid-19 cases in some countries and affordability issues due to the current high edible oil prices.”
CGS-CIMB Futures also said findings from a survey on palm oil areas also revealed that Malaysia’s CPO output was 1.6 million tonnes in June 2021.
“We estimate that Malaysia’s palm oil inventory probably grew by three per cent m-o-m but declined by 15 per cent y-o-y to 1.61 million tonnes at end-June 2021,” it said, adding that this is a departure from historical trends whereby Malaysian palm oil stocks in June declined by an average of 2.2 per cent m-o-m over the past 10 years.
Despite this, it said the palm oil stock level in Malaysia is projected to remain tight as it is 15 per cent below the historical average of 1.9 million tonnes recorded for June palm oil stock levels for the past 10 years. .
On production, CGS-CIMB Futures said its projection of a two per cent m-o-m rise in CPO output to 1.6 million tonnes in June is stronger than historical trends, with Sabah estates likely posted the strongest m-o-m production gains based on a survey.
“However, the key concern is the continuous declining y-o-y output trend, which is likely due to the severe shortage of foreign workers, while ageing trees due to slow replanting, slower new planting rates, and lower fertiliser input may have also contributed to the weaker supply,” it added.