PETALING JAYA: The price of crude palm oil (CPO) is expected to continue to rise at least until the third quarter of this year and is projected to reach RM9,300 a tonne.
Plantation Industries and Commodities Minister Datuk Zuraida Kamaruddin said the figure was achievable based on the development of CPO futures contract trading on Bursa Malaysia Derivatives, Bernama reported.
“If you monitor CPO futures, God willing it will touch RM9,300 a tonne. We think the upward trend in palm oil prices will continue from now until the third quarter of this year.
“The fastest increase is to reach RM9,300 in the third quarter, otherwise it can continue until the end of the year,” she told reporters after officiating at the groundbreaking ceremony for the Crepe Rubber Processing Centre and Rubber Industry Transformation Project or TARGET yesterday.
She was asked to comment on the rising trend of CPO which was reported to have soared over RM8,000 at the beginning of last month and was at RM7,546 per tonne as of last Thursday.
Zuraida said the price increase was indeed beneficial to farmers and the government but may cause the increase in the price of palm oil-related products used by consumers.
“However, we still give subsidies – 20% of our CPO we subsidise the rakyat, so it is not an issue (even if the price of CPO increases),” she said.
Commenting on the entry of 32,000 foreign workers as announced earlier to meet the needs of the plantation sector, Zuraida said the first batch is expected to arrive in the country as early as the end of April.
“We are in the process of bringing them in, the first batch will enter the country in early May or late April,” she said.
Meanwhile, research houses expect palm oil production to improve in the second half of 2022 with the return of foreign workers to Malaysia’s plantation industry.
Malaysia’s February 2022 palm oil inventory dropped at a slower pace by 2.1% month-on-month (m-o-m) to 1.52 million tonnes from 1.55 million tonnes in January and 1.58 million tonnes in December 2021.
“The contraction in the inventory level in the previous month was predominantly attributable to lower CPO production (9.3% fall month-on-month) despite higher CPO imports,” said MIDF Research in a report.
In the intermediate term, MIDF expects Malaysia’s palm oil stockpiles to remain on a downtrend mainly due to the seasonally lower production cycle of palm oil and labour shortage issue.
In line with the low inventory level, it expects the supply tightness situation to remain for the first half of 2022, influenced by the slow production growth and resilient export demand.
Kenanga Research, meanwhile, expects a CPO output of 1.308 million tonnes for March – a 15% m-o-m improvement.
However, it does not rule out the risk of ongoing labour shortages impeding production capacity.
“All in all, we are expecting March to stay tight with gradual improvement in supply within sight.
“Despite high prices, exports are expected to hold due to demand from Europe and Muslim markets seeking to stock up for the coming fasting month (starting April) and Hari Raya Aidilfitri in early May.
“Lower closing inventory is possible though we expect only a slight m-o-m reduction,” Kenanga said.
CGS-CIMB Research, on the other hand, projects palm oil stocks to rise by 4.6% m-o-m to 1.59 million tonnes by end-March, with output and exports rising by 15% and 6% m-o-m, respectively.
Consequently, it predicts CPO prices to trade at a wide range of RM6,000-RM7,500 per tonne in March 2022, also due to uncertainties over the availability of sun oil crops from Russia and Ukraine and Indonesia’s decision to increase its Domestic Market Obligation percentage to 30%, up 10% points from the previous mandate effective March 10, 2022.