HLIB maintains CPO price at RM4,000 per tonne this year
04/01/2024 (Malay Mail), Kuala Lumpur - The crude palm oil (CPO) price will likely remain lacklustre in the next few months, possibly until the second quarter of 2024 in the absence of catalysts, said Hong Leong Investment Bank (HLIB) today.
The investment bank believed CPO’s unattractive price discount against soybean oil, narrow palm oil and gas oil (POGO) spread, high stock levels among key vegetable importing countries, in particular China and India, will curb near-term demand for palm oil.
“Demand sentiment for palm oil will improve once El Nino’s lagged impact on palm production is felt (likely by end-first half of 2024 or early-second half of 2024). We maintain our ‘Neutral’ stance on the sector, given the absence of clear catalyst,” it said in a research note.
For 2024, HLIB has maintained the CPO price forecasts at RM4,000 per tonne in 2024 and RM3,800 per tonne in 2025, based on the assumption that El Nino’s impact on palm production and prices would kick in around mid-2024.
The investment bank said, depending on the intensity and timing of the occurrence, weather anomaly arising from El Nino would in turn result in lower fresh fruit bunch (FFB) yield through bunch failure, floral abortion and prolonged male flowering phase.
It noted that during the recent two El Nino episodes (which happened in 2009-2010 and 2015-2016), its impact on CPO yield was felt eight to nine months after the occurrence.
“Hence, El Nino’s impact on palm production will likely be felt by the end of the first half of 2024 or early second half of 2024 (if history is a guide), and this will in turn boost CPO price sentiment,” added HLIB. ― Bernama