28/06/2012 (The Sun Daily) - Crude palm oil (CPO) prices may have hit bottom at current level of RM2,850 per tonne, said Kenanga Research analyst Alan Lim Seong Chun who is maintaining his average CPO price prediction of RM3,200 per tonne for 2012.

"It (CPO price) is now only 5% away from its 2011 bottom of RM2,700 per tonne and is already 28% below the 2011 high of RM3,950 per tonne," he said in a report yesterday.

"Although CPO prices did fall to RM1,500 per tonne during the 2008 crisis, we do not think such event will materialise as major economies has been prepared to act swiftly when there is any sign of economy slowdown. With higher chances of monetary easing globally and possibility of El Nino materialising, we expect better outlook for CPO prices," he added.

Lim expects CPO prices to surge if El Nino is confirmed as fresh fruit bunch production may fall by a staggering 30% depending on the severity of the El Nino.

"We continue to like the plantation sector for the resilient CPO demand globally, especially in Asia, a smaller CPO output due to tree stress, signs of further monetary easing from the major economies and higher chances for an El Nino to occur in the second-half of 2012," said Lim, reiterating an "overweight" call on the sector.

With expected global CPO demand growth of 6.6% year-on-year in the 2011/12 season surpassing the 4.8% year-on-year growth in production, Lim said the CPO stock-to-usage ratio should decline further to 15.63% from 16.87% last year.

"Going forward, the upside potential for CPO prices remains bright as most of Asia's consumption of cooking oil on a per capita basis is still behind the global's average consumption," he said.