MARKET DEVELOPMENT
Moody's Expects CPO Prices To Average US$700-800 A Tonne This Year
Moody's Expects CPO Prices To Average US$700-800 A Tonne This Year
24/03/2014 (Bernama) - Moody's Investors Service expects crude palm oil (CPO) prices to average between US$700 and US$800 (US$1.00 = RM3.30) per tonne this year, its Vice President Alan Greene said.
He said the prices would remain supported above US$700 per tonne over the next two to three years, driven by resilient food-based usage and rising biodiesel consumption.
In a report entitled 'Strong Fundamentals Underpin Credit Quality of Palm Oil Producers', he said supply is more unpredictable in the short run due to unseasonal weather variations.
The report states that the prices may see further support if production in Southeast Asia is adversely affected by prolonged dry weather conditions arising from the El Nino weather phenomenon in the second half of 2014.
The average CPO price climbed to US$804 per tonne from US$792 per tonne in the first two months of 2014.
Greene said the growing usage of CPO as a feedstock for biodiesel production would be a key driver of demand growth in the next two years.
Indonesia and Malaysia both launched new biodiesel mandates in the second half of 2013 to spur the domestic consumption of CPO.
Meanwhile, Greene said he expects evolving tax laws in Malaysia, Indonesia and India to affect the profitability of palm oil producers operating in these countries.
"Companies with geographically diversified operations, such as Sime Darby, are more insulated from regulatory changes.
"Producers will also need to address environmental concerns to manage reputational risk," he said.
In 2011, Indonesia broadly halved the export tax bands on refined palm oil and derivatives while leaving the tax rate on CPO largely unchanged.
In January 2013, Malaysia cut its export tax on CPO to 4.5-8.5 per cent from around 22 per cent to better match Indonesia's tax regime.
More recently, India increased import tariffs on refined palm oil products by 2.5 per cent in January 2014 to protect local refiners.
He said the prices would remain supported above US$700 per tonne over the next two to three years, driven by resilient food-based usage and rising biodiesel consumption.
In a report entitled 'Strong Fundamentals Underpin Credit Quality of Palm Oil Producers', he said supply is more unpredictable in the short run due to unseasonal weather variations.
The report states that the prices may see further support if production in Southeast Asia is adversely affected by prolonged dry weather conditions arising from the El Nino weather phenomenon in the second half of 2014.
The average CPO price climbed to US$804 per tonne from US$792 per tonne in the first two months of 2014.
Greene said the growing usage of CPO as a feedstock for biodiesel production would be a key driver of demand growth in the next two years.
Indonesia and Malaysia both launched new biodiesel mandates in the second half of 2013 to spur the domestic consumption of CPO.
Meanwhile, Greene said he expects evolving tax laws in Malaysia, Indonesia and India to affect the profitability of palm oil producers operating in these countries.
"Companies with geographically diversified operations, such as Sime Darby, are more insulated from regulatory changes.
"Producers will also need to address environmental concerns to manage reputational risk," he said.
In 2011, Indonesia broadly halved the export tax bands on refined palm oil and derivatives while leaving the tax rate on CPO largely unchanged.
In January 2013, Malaysia cut its export tax on CPO to 4.5-8.5 per cent from around 22 per cent to better match Indonesia's tax regime.
More recently, India increased import tariffs on refined palm oil products by 2.5 per cent in January 2014 to protect local refiners.