14/01/2009 (The Star Online), Petaling Jaya - The price of crude palm oil (CPO) fell below RM1,900 per tonne yesterday, tracking the sharp downturn in the price of soybean oil overnight on the Chicago Board of Trade (CBOT) as well as lower crude oil prices.

Palm oil tracks the prices of soybean oil and crude oil as it is a substitute for soybean oil and is used as feedstock in the production of biofuel.

Analysts said the recent rally on commodities might be over for now and that the price of CPO would weaken further, going forward.

CPO futures for the benchmark April delivery on the Bursa Derivatives Exchange lost RM130 to RM1,865 per tonne.

OSK Research analyst Alvin Tai said the sharp downturn in soybean oil would likely further weaken CPO prices and plantation stocks.

After weeks of strengthening, the price of soybean oil tumbled after figures released by the US Department of Agriculture showed supplies were higher-than-expected and demand, lower-than-projected.

“This suggests that the recent rally in agriculture commodities may be over for now,” Tai said in OSK’s latest plantation sector update.

For palm oil, he said, a 37% decline in palm oil shipments for the first 10 days of January suggested that the current high prices were causing buyers to hold back purchases and that CPO prices would fall to between RM1,500 and RM1,600 per tonne.

Tai expects the continuing delay in purchases due to the high prices to result in stockpiles rising again.

HwangDBS Vickers Research is maintaining a cautious view on the plantation sector, saying palm oil yields could remain higher than normal due to the La Nina impact in the first three months of the year.

Current palm oil stocks at 1.99 million tonnes were still high by historical standards, it said.

The research house expects palm oil stocks in January to remain flat at 1.99 million tonnes before rising again to 2.02 million tonnes in February due to a lack of demand.

HwangDBS Vickers expects CPO prices to hover at RM1,500 to RM2,000 per tonne in the near term.