06/03/2024 (The Edge Malaysia), Kuala Lumpur - Fastmarkets Palm Oil Analytics managing editor Dr Sathia Varqa said the current high cost of crude palm oil (CPO) isn't sustainable and anticipates a price drop to between RM3,500 and RM3,700 in the second half of 2024.

This is because the high phase of palm oil output from March onwards coupled with high stocks in China and India will keep CPO prices under pressure, he said on Wednesday at the Palm & Lauric Oils Price Outlook Conference & Exhibition.

“After witnessing RM4,000 MT (metric tons) in [the] first quarter (1Q2024), high prices will not be sustained otherwise competitiveness and demand will suffer. Prices are bullish for the first quarter, but palm oil is expected to trade lower in the second quarter,” said Sathia.

Meanwhile, CIMB Investment Bank’s head of Malaysia research and regional head of agribusiness research Ivy Ng Lee Fang said that the B35 mandate implemented by the Indonesian government will lead to a decline in palm exports, subsequently tightening the global supply of palm oil and supporting the CPO price.

She said that the global palm oil supply growth is projected to slow to 1.8% in 2024, compared with the historical compound annual growth rate of 3.8%, due to the impact of El Nino, replanting activities and ageing estates.

Nevertheless, the impact of El Nino was minimal in the Malaysian plantation sector but higher in the Indonesian counterpart, she said, noting that this impact will be observed particularly in the third quarter of 2024.

Overall, CIMB forecasts CPO to average marginally higher at RM3,900 in 2024 compared with RM3,809 in 2023. For the long term, the research house expects CPO to average RM3,500 due to increased production costs over the years.

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