MARKET DEVELOPMENT
CGS-CIMB: CPO price predictions range from RM4,000 to RM9,427 per tonne
CGS-CIMB: CPO price predictions range from RM4,000 to RM9,427 per tonne
14.03.2022 (www.nst.com.my) - KUALA LUMPUR: Crude palm oil (CPO) price will trade between RM4,000 and RM9,427 per tonne, markedly higher than the 2021 average price of RM4,407 per tonne, based on the predictions of nine speakers at a palm oil price outlook conference.
CGS-CIMB Research has retained its neutral rating on the agribusiness sector and deduced that the nine speakers predicted the CPO price trading band for 2022 based on an exchange rate of RM4.20/US$1.
In a research note, it said using the same methodology as in the past 15 years, it estimated the mean of the 2022 price forecasts to be around RM5,836 per tonne.
"However, this is 22 per cent lower than the spot CPO price of RM7,511 per tonne as of March 10, 2022.
"We also observed that median price forecasts at the recent Palm and Lauric Oils Price Outlook Conference (POC) 2022 tend (though not always) to fall behind actual prices achieved when CPO prices are on a downtrend and vice versa," it added.
During the POC, expert speakers Thomas Mielke and Dorab Mistry mentioned that forecasting the average CPO price for this year is extremely difficult due to the ever-changing situation regarding the Russia-Ukraine war (curbing sunflower oil exports) and government policies.
Meanwhile, Maybank Investment Bank (Maybank IB) said the Russian-Ukraine war is key to short-term CPO price direction.
"We believe CPO average selling price (ASP) will likely peak in the first quarter of 2022 (Q1 2022) on tight global supplies and possibly stay lofty in Q2 2022 before softening in the second half of 2022 (H2 2022) on seasonal output recovery (unless Russia-Ukraine war becomes protracted) as La Nina is forecast to end soon.
"CPO price is near a record high despite February stockpile (of 1.52 million tonnes) being 16 per cent higher compared to a year ago and 20 per cent above the lowest stock level in a decade recorded in December 2020 at 1.27 tonnes," it said in its research note.
Maybank IB said the market is presently pricing a premium on the Russia-Ukraine war that has blocked off sunflower oil's trade from the Black Sea region, despite a better CPO production outlook in the coming quarters.
"At the same time, Indonesia's domestic market obligation export restrictions to prioritise the availability of domestic cooking oil ahead of Lebaran added to the supply risk.
"A protracted Russian-Ukraine war is our immediate key concern as it is poised to set short-term price direction, and our current base case assumption is a truce before the end of the sunflower's spring planting season (to allow planting of the crop).
"Unless the war stops, there is also heightened risk of greater sanctions on Russia or by Russians on the rest of the world with each passing day," it added.
Russia and Ukraine account for 75 per cent of global exports of sunflower oil in the 2021 marketing year (i.e. 8.5 tonnes or 8.9 per cent of global 17 oils and fats exports).
"Hence, a quick end to the Russian-Ukraine war will help restore normalcy," said Maybank IB.