MARKET DEVELOPMENT
RAM Maintains CPO Price Forecast at RM2,300 to RM2,500 For 1Q17
RAM Maintains CPO Price Forecast at RM2,300 to RM2,500 For 1Q17
08/06/2017 (Borneo Post) - RAM Ratings maintains its average full-year crdue palm oil price forecast between RM2,300 to RM2,500 per metric tonne (MT) despite stronger-than-expected prices in the first quarter of 2017 (1Q17).
In the first quarter, the price of CPO averaged RM3,152 per MT as inventory remained tight despite a strong rebound in production.
Since April, prices have ranged between RM2,400 and RM2,600 per MT which was within the rating agency’s expectations for the second quarter.
“In our view, these buoyant prices are unsustainable – we expect prices to moderate sharply in the second half as the market struggles to absorb increased production during the peak production season and crop yields recover from El Nino weather conditions in 2015 per 2016,” it said in a statement yesterday.
As the effects of one of the strongest El Nino weather episodes ease, production in Malaysia rebounded to four million MT in 1Q17, climbing 17.9 per cent year on year (y-o-y). In March 2017, local production jumped 16 per cent m-o-m to 1.46 million MT, the first monthly increase since September 2016.
“Indonesia’s output also recovered, rising an estimated 8.1 per cent y-o-y in 1Q. For the full year, production growth in both countries is estimated to amount to a combined 10 per cent,” RAM added.
“While local inventory levels were 17.6 per cent lower y-o-y as at end-March 2017, we expect inventory to build up in 2H, putting pressure on prices.”
Meanwhile, local palm oil exports remained relatively flat y-o-y in 1Q17 due to weaker export demands and competition from Indonesian palm oil. Exports to India, which saw the largest decline, are expected to continue to fall as traders capitalise on lower tariffs for sunflower oil imports.
Indonesia’s palm oil exports during the quarter were supported by rising exports to the EU as well as significantly higher demand from the US, resulting in a 23.6 per cent increase y-o-y.
“For the full year, we expect demand for CPO to be fairly healthy on the back of modest recovery in global growth and the ongoing implementation of biodiesel mandates in key producing countries, albeit falling short of absorbing incremental supply,” it said.
However, RAM said competition from an ample supply of rival soybean oil (SBO) will remain a consistent theme this year.
In the first quarter, the price of CPO averaged RM3,152 per MT as inventory remained tight despite a strong rebound in production.
Since April, prices have ranged between RM2,400 and RM2,600 per MT which was within the rating agency’s expectations for the second quarter.
“In our view, these buoyant prices are unsustainable – we expect prices to moderate sharply in the second half as the market struggles to absorb increased production during the peak production season and crop yields recover from El Nino weather conditions in 2015 per 2016,” it said in a statement yesterday.
As the effects of one of the strongest El Nino weather episodes ease, production in Malaysia rebounded to four million MT in 1Q17, climbing 17.9 per cent year on year (y-o-y). In March 2017, local production jumped 16 per cent m-o-m to 1.46 million MT, the first monthly increase since September 2016.
“Indonesia’s output also recovered, rising an estimated 8.1 per cent y-o-y in 1Q. For the full year, production growth in both countries is estimated to amount to a combined 10 per cent,” RAM added.
“While local inventory levels were 17.6 per cent lower y-o-y as at end-March 2017, we expect inventory to build up in 2H, putting pressure on prices.”
Meanwhile, local palm oil exports remained relatively flat y-o-y in 1Q17 due to weaker export demands and competition from Indonesian palm oil. Exports to India, which saw the largest decline, are expected to continue to fall as traders capitalise on lower tariffs for sunflower oil imports.
Indonesia’s palm oil exports during the quarter were supported by rising exports to the EU as well as significantly higher demand from the US, resulting in a 23.6 per cent increase y-o-y.
“For the full year, we expect demand for CPO to be fairly healthy on the back of modest recovery in global growth and the ongoing implementation of biodiesel mandates in key producing countries, albeit falling short of absorbing incremental supply,” it said.
However, RAM said competition from an ample supply of rival soybean oil (SBO) will remain a consistent theme this year.