14/05/2015 (The Star) - The El Nino effect which is currently in its early stages, according to the Australian government’s Bureau of Meteorology, will be a boost for crude palm oil (CPO) prices.

CIMB Research said in a report yesterday that the El Nino phenomenon is typically positive for CPO prices, especially if the event coincides with low stockpiles.

“Given that there is currently sufficient stock buffer for edible oils, we do not expect this to boost near-term prices significantly. We would turn more positive on CPO price, if the phenomenon is combined with strong execution of the B15 programme by the Indonesian government.

CIMB said the event could also boost demand for palm oil, especially if India’s oilseed production is hit by poor monsoon conditions caused by El Nino.

It, however, noted that the phenomenon had historically resulted in below-average rainfall in the two largest palm oil-producing countries, namely Malaysia and Indonesia, as well as Australia and India.

Maybank Investment Bank Bhd analyst Ong Chee Ting in a report yesterday concurred that palm oil might rally should an El Nino weather pattern spur dry conditions across South-East Asia.

Prices might advance to RM2,500 a tonne over the next three months, she said.

“In the coming months, we expect palm oil exports to pick up as end-buyers like China, with its low inventory level, may take a defensive strategy to stock up ahead, on fear of a possible supply crunch,” Ong said.

While this would boost palm oil price, the extent of any advance would depend largely on the El Nino’s intensity, she added.