Palm oil analysts see dim pricing ahead

March 8, 2018 @ 3:12PM
By Ooi Tee Ching and Nurhayati Abllah


KUALA LUMPUR: There is bearish sentiment at the 29th Palm and Lauric Oils Price Outlook Conference and Exhibition (POC2018) here yesterday.

 Vegetable oil analysts from around the world, who gathered here, gave a bearish palm oil price forecast in the months ahead.

 Since the beginning of the year until now, palm oil futures on Bursa Malaysia Derivatives Market averaged at around RM2,500 per tonne.

 Oil World executive director Thomas Mielke said global palm oil production is expected to rise to 70.84 million tonnes this year from 67.87 million tons in 2017, boosted in part by Indonesia’s 38.8 million tonnes in production.

 He estimated Malaysia’s palm oil output is to top 20.76 million tonnes this year, 4.2 per cent more than 19.92 million tonnes in 2017.

 Indonesia and Malaysia typically account for about 85 per cent of the global palm oil output.

 “While supply is seen to be comfortably large, the global demand for oils and fats is rapidly riding for food and biodiesel,” said Mielke.

 He explained prices of palm oil and its rival soy are likely to trade sideways or slightly higher in the next three to five weeks but weakness would emerge from end-April onwards.

 “Palm oil prices is expected to trade rangebound between US$630 and US$600 (RM2,300 and RM2,500) a tonne this year,” Mielke said.

 Triputra Agro Persada Group co-founder and chief executive officer Arif P. Rachmat was next up the stage to present his paper titled CPO price outlook: A practitioner view of the market and Indonesia’s policies and implementations.

 He noted that last year, Indonesia’s palm oil exports totalled US$23 billion.

 Arif expects palm oil prices to remain stable at between US$600 and US$650 (or RM2,400 and RM2,600) per tonne by the third quarter of 2018.

 “We see strong production across Indonesia and Malaysia by 3.6 million tonnes this year. Despite strong production, firm global demand will see stocks across Indonesia, Malaysia, India and China moderating from December 2017’s 7.8 million tonnes,” he said.

 LMC International Ltd chairman Dr James Fry was the last to present his paper named Palm producers look to Opec and Indonesia’s biodiesel mandate for price support.

 Fry reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices.

 When vegetable oil prices approach that of petroleum, biodiesel production and direct burning of vegetable oils become increasingly attractive options. This creates a floor price.

 Fry noted that as long as Organisation of the Petroleum Exporting Countries (Opec) goes on with its supply cuts to support Brent crude oil at between US$65 and US$70 per barrel, edible oils would continue to trade above US$500 per tonne.

 “Indonesia's Estate Crop Fund has been a game changer since it was launched in 2015 as it is key to support palm oil prices when funds are channelled to boost biodiesel usage there.

 “I see palm oil prices rising briefly to RM2600 per tonne and then settling to RM2,300 by July 2018,” Fry added.

ISTA Mielke GmbH executive director Thomas Mielke, who is also Oil World editor presents a paper entitled Demand Outlook of Palm and Lauric, Impact of other Edible Oils and Price Prospects 2018 on 29th Annual Palm and Lauric Oils Conference and Exhibition 2018 (POC2018) at Kuala Lumpur. NSTP photo by ROSELA ISMAIL
LMC International Ltd chairman Dr James Fry was the last to present his paper named Palm producers look to Opec and Indonesia’s biodiesel mandate for price support. (Pix by ROSELA ISMAIL)