CPO Price To Moderate In 2H, OCBC Raises FY Forecast To RM3,950
24/06/2024 (Business Today) - CPO price has risen by 1.5% since previous Monthly Commodity Outlook publication on 24 May says OCBC which reached MYR3,930/mt as of 21 June closing. This brings the quarter-to- date average price to MYR4,040/mt, representing a ~1.0% increase compared to the 1Q24 price average of MYR3,998/mt.
OCBC said while it continues to hold the view that CPO prices will moderate in 2H24, recent trends suggest that the downward price movements may be more gradual. Consequently, the bank said it has revised its full-year 2024 price forecast upwards by MYR300/mt to MYR3,950/mt, translating to a ~3.6% YoY increase from the 2023 average price. This price revision primarily reflects the elevated CPO prices in 1H24 due to supply disruptions caused by El Nino. However, as the El Nino phenomenon has faded in May, it anticipates further price moderation in the coming months.
The supply outlook remains largely positive. Malaysia’s CPO production rose by 13.5% MoM, marking the third consecutive month of monthly production growth and confirming the onset of seasonally higher production levels. Encouragingly, the May print brought Malaysia’s cumulative year-to-May CPO production to 7.3mn tonnes, a 9.3% rise in the same period in 2023.
With the El Nino index rapidly cooling, wetter weather can be expected in key palm-growing regions in Malaysia and Indonesia, which is likely to be supportive of overall yield. indeed, the MPOC expects a notable rise in palm oil production from August to September Meanwhile, the demand picture continues to be mixed. While the MPOB data showed an 11.7% YoY increase in palm oil exports in May, India’s imports slowed dramatically to 11.6% from a 40.9% rise in April. In addition, the cumulative year-to- May of Malaysia’s palm oil export growth of 6.7% underperformed the growth in production. Interestingly, while
India’s palm oil imports were more muted at 3.7% YoY year-to- May, rival sunflower oil imports grew significantly by 22.7% in the same period. Also factoring into the price dynamics is the narrowing of palm oil discounts over soy oil, which will keep CPO prices range- bound in the coming months with a slight bearish bias. Improved weather conditions in South America will see more soybean supply, coupled with relatively muted demand from China; both are bearish for soy oil prices and should put a cap on any potential price gains in CPO prices.
The house said while it continues to hold the view that CPO prices will moderate in 2H24, recent trends suggest that the downward price movements may be more gradual. Consequently, it has revised the full-year 2024 price forecast upwards by MYR300/mt to MYR3,950/mt, translating to a ~3.6% YoY increase from the 2023 average price. This price revision primarily reflects the elevated CPO prices in 1H24 due to supply disruptions caused by El Nino. However, as the El Nino phenomenon has faded in May, it anticipates further price moderation in the coming months.