10/03/2009 (The Star Online), Petaling Jaya - The benchmark May crude palm oil (CPO) futures contract failed to sustain above RM2,000 per tonne yesterday, amid uncertainty over demand in the coming months and ahead of a two-day convention on palm oil in Kuala Lumpur starting today.

Despite trading mostly in the RM2,001–RM2,007 range, the contract closed lower at RM1,995.

A trader expects the near-term direction of the CPO prices this week to be dictated by the February production and export figures to be released by the Malaysian Palm Oil Board (MPOB) today. Prices will also be influenced by the forecasts for CPO to be unveiled by palm oil “gurus” at the Annual Palm & Lauric Oils Conference/Exhibition: Price Outlook 2009/2010 (POC 2009) in Kuala Lumpur.

Industry consultant MR Chandran told StarBiz that CPO prices would be supported at around RM1,750 and were unlikely to retreat to the rock-bottom price of RM1,400 registered in October last year.

He expects the commodity to trade between RM2,200 to RM2,250 by June in anticipation of lower production and easing of CPO and soybean stockpiles worldwide.

Industry players and analysts believe that palm oil stockpiles for February could be lower at 1.7 million tonnes versus 1.83 million in January. Stocks were at a record 2.27 million tonnes in November last year.

The CPO price discount to soybean has narrowed to between US$100 to US$120 a tonne against US$450 previously.

Hwang-DBS Vickers Research said in its latest plantation note that CPO could move into supply deficit this year.

“There should not be much leeway for prices to drop to the October to November levels,” it said, citing slower increases in palm oil supply this year.

Having jumped by 20% since the end of last year, CPO prices should pull back over the near term, it said.

“We expect prices to gradually rebound during peak harvest season from September to November, which may yet run the risk of lower-than-expected production,” the research house said.

Meanwhile, some 1,000 participants are expected at the two-day POC 2009, organised by Bursa Malaysia, which starts today.

The highlight of the POC 2009 will be price forecasts from palm oil “gurus” like Dorab Mistry of Godrej International Ltd, OilWorld publisher Thomas Mielke and LMC International Ltd managing director Dr James Fry.