PETALING JAYA: Crude palm oil (CPO) will continue to stay lofty above RM3, 000 per tonne in the near term amid tight supply of global vegetable oils and uncertainty on the recovery of palm oil output in the second half of this year, opines plantation industry veteran Datuk Yeo How.

       In a recent price outlook session hosted by Maybank Kim Eng, Yeo, who is president of Singapore-based Apical Group, pointed out that CPO will continue to follow the lead of prices of other competing vegetable oils.

       He also believed that Malaysia’s palm oil inventory will not exceed 1.8 million tonnes by year-end.

       Overall, the supply and demand dynamics are quite supportive of the CPO prices for 2022, added Yeo.

       Prior to joining Apical in 2008, Yeo was IOI Corp Bhd’s chief financial officer (CFO) and group executive director. During his stint at IOI Corp, he was named “The Best CFO” by Finance Asia.

       According to Yeo, the market may be disappointed by earlier projections of strong palm oil output recovery in the second half of this year (H2) due to the good rainfall experienced over the past year. This is mainly due to under fertilisation by smallholders since 2018, he added.

       On the demand side, Yeo noted that China, which traditionally buys a few months ahead, has shown good buying interests in palm oil in the third quarter (Q3) of this year.

       “This is in part due to falling hog prices in China and soymeal prices in recent months which has resulted in lower soybean crushing, ” he said.

       Demand from India is also anticipated to be strong especially in Q3 due to the recent cut in CPO import duty and the surprise removal of restriction on the imports of refined palm oil till end of this year.

       Yeo also expects that food and industrial demand growth will reflect the post-Covid-19 vaccination optimism.

       His only caveats on the plantation sector are the unpredictable weather and government policies.

       Meanwhile, Maybank Kim Eng, which maintained a positive call on the sector, said its listed planters’ top picks include Kuala Lumpur Kepong Bhd, Sarawak Oil Palms Bhd and Boustead Plantations Bhd.

       The research house noted that the risk to its CPO average selling price forecast of RM3, 100 per tonne is on the upside if “the anticipated strong palm oil output recovery in H2 did not materialise, which in part, could be contributed by the acute shortage of workers in Malaysia and slower-than-expected build-up in local palm oil inventory by year-end.”

       Over the past 18 months, a confluence of demand and supply factors led to an incredible bull run for vegetable oils globally.

       The key factors include demand recovery post-Covid-19 first wave, especially from China as demand exploded post-lockdown in April 2020, and it went on to buy US soybeans at record levels.

       In addition, Indonesia’s new export levy structure at end-2020 ensured its B30 biodiesel mandate – creating a demand for about 8 million tonnes of palm oil annually.