CPO prices expected to climb to RM4,000 per tonne by March 2024: Experts
09/11/2023 (News Straits Times), Kuala Lumpur - Palm oil experts expects crude palm oil (CPO) prices to rise next year on the back of flattish global supply due to weather developments such as El-Nino and climate change.
Glenauk Economics managing director of consultancy and agricultural economist Julian McGill said CPO prices may climb to RM4,000 per tonne by the first quarter of 2024.
Production is expected to be flat or decline in 2024 in Malaysia and Indonesia, depending on rainfall during the current El Nino, said McGill.
"Palm oil supply has slowed its growth. This year has seen a very modest increase in Indonesian output, next year will be flat to declining (depending on the rainfall in this unusual El Nino).
Meal demand is not growing sufficiently quickly to absorb the additional output, particularly once Argentina's crush recovers.
"This will lead to higher oil prices in 2024, as the soybean crush increases. We expect Malaysian CPO prices to increase to RM4,000 by the end of Q1 2024," he added.
Hamburg-based Oil World executive director Thomas Mielke said palm oil prices are now close to their lows and will rise in 2024 and 2025 due to insufficient supplies and lower growth in other edible oils.
"Palm prices may climb by US$100-US$150 within the next four to six months," he said.
Price volatility has increased and there are concerns that it will remain high, he added.
Speaking at the Global Economics and Marketing Conference of the International Palm Oil Congress and Exhibition (PIPOC) 2023 here today, Mielke expects Indonesian palm oil output to stagnate in 2024, and Malaysian production near 18.4 million tonnes.
In 2023, Indonesia and Malaysia are likely to export 31 million tonnes and 17 million tonnes of oils and fats respectively, thus accounting for 33 per cent and 18 per cent of world exports, mainly palm oil.
Big increase in palm oil exports in recent months resulted in large stocks in India and other importing countries. This now leads to temporarily reduced palm oil imports in October-December 2023, said Mielke.
CIMB head of research Ivy Ng Lee said Malaysia is expected to contribute 18.2 million tonnes tp the global supply, with Indonesia taking the lead with 48 million tonnes.
She said lower yields from aging palm oil estates, the impact of El-Nino, reduced fertiliser input in prior years and lower productivity from new workers will affect palm oil supply in 2024.
"We anticipate that current El-Nino news will have a more pronounced impact on CPO prices in the second half of 2024 when current highs stocks have been reduced, and Indonesia's biodiesel implementation (B35) has gained traction.
"The implementation of B35 in Indonesia and high crude oil prices (due to geopolitical risks) are expected to support biodiesel demand."
On the other hand, Singapore Fastmarket Palm Oil Analytics Dr Sathia Varqa said supply risk from weather, sunflower oil pricing and the ongoing geopolitical tension are the three main swing factors in CPO pricing in November-December 2023 and 2024.
"Ongoing high production phase in Malaysia and high stocks in China and India is bearish on CPO prices in the short term," he said.
In the event of a strong El-Nino, production will be severely impacted in 2024 with expectation of around a million tonne drop.
"Palm prices are facing downward pressure now but is expected to make a recovery trading RM3,700-RM3,900 per tonne on the CPO futures active month
Prices are expected to build on the recovery into the first quarter of 2024. Seen trading to a high of RM4 000-RM4,200 per tonne, said Sathia.