Analysts raise 2024 palm oil prices on tight supply amid El Nino
28/07/2023 (Hellenics Shipping News) - UOB KayHian on Wednesday raised its crude palm oil (CPO) average selling price (ASP) for 2024 to 4,200 ringgit (921 U.S. dollars) per tonne on tight supply amid El Nino.
The research house said in a statement that with the expectation of tighter palm oil supplies going into 2024 and rising weather risks, it has revised up its 2024 CPO price assumption from 4,000 ringgit per tonne.
According to the research house, 2024 CPO supply growth is expected to be lower at 0.8 percent year on year versus 3.5 percent year-on-year in 2023 due partly to lower inventory carried forward from the end of 2023.
“Also, El Nino is not here yet and most of the producing regions are still receiving decent rainfall. Should any prolonged dryness occur, 2024 supplies could tighten further as CPO production could be flat or lower year-on-year,” it said.
UOB Kayhian also said heat and dryness continue to pose a risk to the North American planting season, which could lead to downward revisions of the United States soybean production and Canada’s canola production for the 2023-24 season.
However, UOB Kayhian is maintaining its 2023 CPO price assumption at 4,000 ringgit per tonne.
According to UOB Kayhian, CPO prices have recovered 20 percent from June 1 as CPO production came in lower than expected in the second quarter.
UOB Kayhian has revised down 2023 global palm oil production by 2 percent after taking into consideration lower production.
This revision was prompted by its recent visits and channel checks which revealed that the peak production in the second half is not going to be a strong as older trees’ yields have yet to reach their full potential, while some young mature areas are not meeting production targets.
RHB Investment Bank on Monday raised its 2024 and 2025 price assumptions to 3,900 ringgit per tonne and 3,800 ringgit per tonne respectively.
“We believe prices could be higher in the second half of 2024 versus the first half of 2024, as the impact of El Nino would only be seen from May-June onwards,” said the research house.
“For 2024, if the El Nino is a moderate one, there would be an impact on supply – although not very significant – while prices could continue to be held back by lackluster demand,” it said.
The research house’s 2023 price assumptions, however, were unchanged at 3,900 ringgit per tonne.
“While there is a high chance El Nino will be confirmed soon, we expect the impact on palm oil output to only be seen in 2024,” it said.
Source: Xinhua