22/05/2023 (New Straits Times), Kuala Lumpur - Affin Hwang Investment Bank Bhd forecasted a rise in crude palm oil (CPO) prices, particularly in 2024, since the output will be hampered by the climatic phenomenon of El Nino.

Malaysia's crude palm oil (CPO) production is expected to rise from 18.6 million to 18.8 million metric tonnes (MT) in 2022, up from 18.45 million MT in 2022.

This is partly owing to the corporation expecting additional workers to join Malaysia between the middle and end of the year, alleviating labour shortage concerns.

According to Affin Hwang, this has the potential to fall below 18 million MT in 2024 due to the delayed effect of El Nino on CPO production.

In terms of the 2023 season, Affin Hwang predicts an increased supply of vegetable oils, despite lower-than-expected market expectations, to potentially exert some pricing pressure, as witnessed by specific vegetable oil prices.

Nonetheless, the firm said the downside for CPO prices would not be significant from the current level of about RM3,700 per MT.

The firm believes that strong demand for vegetable oils from the biodiesel industry coupled with El Nino sentiment would lend support to the price.

"We now raise our CPO ASP assumptions to RM3,800 per MT to RM4,000 per MT for 2023 which is from RM3,100 per MT to RM3,200 per MT and RM4,200 per MT to 4,400 per MT for 2024 from RM2,900 per MT to 3,000 per MT," it said.

With that, Affin Hwang upgraded the plantation sector to 'Neutral' from 'Underweight'.

"Given the changes to our assumptions for CPO prices, production volumes, and production costs as well as rolling forward our valuation horizon to 2024, we now have 'Buy' ratings on KLK and Jaya Tiasa.

"While 'Hold' ratings on SD Plantation, IOI Corp, Genting Plantations, FGV, Hap Seng Plantations, and Ta Ann," it said.

https://www.nst.com.my/business/2023/05/911947/cpo-price-rise-2024-el-nino-reduces-output