20/11/2017(The Star Online) - KUALA LUMPUR: Palm oil experts expect the price of the commodity to hover between RM2,600 and RM2,900 per tonne these few months before turning weak as supply outstrips demand by mid-2018.

At the recently concluded International Palm Oil Congress & Exhibition (PIPOC 2017) hosted by the Malaysian Palm Oil Board (MPOB) here, LMC International chairman James Fry pegged crude palm oil (CPO) at RM2,700 to RM2,800 per tonne, while United Plantations Bhd

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deputy chairman Datuk Carl Bek-Nielsen projected CPO at RM2,400 to RM2,800 per tonne in 2018.

Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong who officiated at PIPOC 2017 is also positive that CPO prices would average between RM2,600 and RM2,700 per tonne next year.

To date, the one most bullish about the CPO price is Godrej International Ltd director Dorab Mistry. He told an oilseed conference in China last Wednesday that CPO may hit RM3,100 per tonne by January next year.

This is based on the assumption that Brent crude oil will trade at US$45-US$65 per barrel, the US Federal Reserve will raise interest rates and the US dollar will strengthen against currencies in Brazil, Argentina and India.

Meanwhile, Fry, a strong proponent of the co-relationship between palm oil and crude oil prices, said: “The global benchmark Brent crude oil price is the floor to the CPO price.”

He expects CPO to be traded at RM2,700 to RM2,800 per tonne if “the Brent crude oil price remains at US$60 per barrel next year. But should Brent go up to US$65 per barrel, then CPO could be traded by RM100-RM200 more per tonne”.

Fry also said CPO production will likely increase in 2018, post the recent El Nino episode, which resulted in a severe drought that affected the fresh fruit bunch production in the region.

During the big El Nino phenomenon in 1997 and 1998, Malaysian palm oil production saw huge growth the following year. Currently, local estates are already showing similar signs of growth in output, following the recent super El Nino seen in 2015 and 2016.

The MPOB is also targeting CPO production to hit 19.5 million tonnes this year compared with 17.5 million tonnes in 2016. The end-October palm oil stocks stood at a 21-month high of 2.19 million tonnes.

Meanwhile, Bek-Nielsen pointed out that the trend in the world’s economy would be an important indicator for the consumption of oils and fats globally, going forward. The adverse weather conditions will be also a strong catalyst for CPO prices to be traded higher.

On positioning CPO as a strategic crop of the region, he said: “As the world is moving into different spheres, all palm oil-producing countries must come together and change their strategic approach.’’