KUALA LUMPUR: Malaysian planters will need to keep a close eye on a few global issues this year, including the weather development, according to Maybank Investment Bank Research (Maybank IB).
The investment bank said that since the current El Nino is only expected to end sometime in early 2024, there is still a great deal of uncertainty surrounding the projected record oilseed output in 2023/2024.
"If unfavourable weather conditions persist in Brazil over the next two months, it could send soybean prices higher, which should benefit crude palm oil (CPO) prices indirectly too," it said in a note today.
Maybank IB has maintained its CPO average selling price (ASP) forecast of RM3,700 per tonnes for 2024, which is below 2023's RM3,830 per tonnes.
It said this is premised on a good South American soybean harvest and an anticipated lower YoY unit cost.
"In terms of price trend, the CPO price is expected to be off to a good start in the first quarter (Q1) of 2024 owing to the seasonally low output cycle and trend lower by mid-2024 in anticipation of seasonally better output in the second half of 2024 (2H24)," it said.
Meanwhile, Maybank IB warned that recessionary fears will linger this year.
The effects of high US interest rates, the wars in Russia-Ukraine and Israel-Hamas, and the financial health of many countries pose much uncertainty for global demand, it said.
Weaker than-expected demand would lead to a higher-than-expected stockpile, dragging down the CPO price, it noted.
The Malaysian government is also conducting a comprehensive study on taxes in the palm oil sector and hopes to complete the study sometime this year.
Among others, planters are asking for a review of the plantation sector's windfall profit levy.
"At present, a levy of 3.0 per cent is chargeable (on per tonne of fresh fruit bunch) on CPO prices above the RM3,000 per tonnes threshold in Peninsular Malaysia and above the RM3,500 per tonnes threshold in East Malaysia.
The investment bank is neutral in 2024 for the plantation sector, with trading opportunities in the first quarter (Q1).
It said that Malaysian planters' earnings in 2024 will likely be better year on year (YoY) owing to lower unit costs, lower fertiliser expenses, and higher productivity.