10/11/2022 (The Star Online), Kuala Lumpur - The price of crude palm oil (CPO) is projected to stay above the RM4,000 per tonne level for the coming months and trend lower from the second quarter of 2023, said Hong Leong Investment Bank (HLIB) Research in its latest sector update.

It said CPO price for the immediate term could be supported by near-term supply concerns and palm price's competitiveness.

"CPO price will likely sustain at above RM4,000/mt over the next few months (possibly until 1Q23), supported by uncertainties on the fate of Black Sea Grain Corridor, lower near term palm supply arising from the seasonally low palm oil production cycle and the onset of La Nina," it said.

It said other contributing factors included favourable POGO spread and CPO’s wide discount against soybean oil, and easing concerns on Indonesia’s palm oil stockpiles.

However, HLIB expects CPO to start trending lower from 2Q23 on the back of better supply visibility for vegetable oils arising from the easing labour shortage in Malaysia and an absence of weather anamolies.

In addition, there will be a heightened risk of global recession as well as inventory build up in key palm oil exporting countries.

"We lower our CPO price assumptions for 2022-23 to RM5,050/mt (from RM5,500/mt earlier) and RM4,000/mt (from RM4,500/mt earlier), mainly to reflect weaker CPO price in 3Q22, and better supply visibility and the absence of demand catalyst.

"CPO price assumption for 2024, on the other hand, remains unchanged at RM3,800/mt. Earnings forecasts of individual planters (arising from lower CPO price assumptions) will be reviewed in upcoming results season," it said.

HLIB has an "overweight" recommendation on the sector, Its top "buy" calls in the sector are Kuala Lumpur Kepong Bhd with a target price of RM27.27 and IOI Corp Bhd with a target price of RM4.65.

https://www.thestar.com.my/business/business-news/2022/11/10/cpo-price-could-trend-lower-from-2q23