10/08/2011 (The Star) - Crude palm oil (CPO) futures resumed its downtrend yesterday to close below RM3,000 per tonne amid weak external factors, such as the US credit-rating downgrade and the debt crisis in European countries.

The third-month benchmark CPO futures contract for October yesterday lost RM74 to close at RM2,920 per tonne, which was also the lowest level in over nine months.

MIDF Research, in a report yesterday, said most commodity prices had dropped following the downgrade of the US credit rating by Standard & Poor's (S&P).

“The CPO price has fallen 21.4% year-to-date to RM3,045 per tonne.

“However, its year-to-date average of RM3,423 per tonne is still 35% higher that that in the corresponding period last year,” said the research house.

On Aug 5, S&P cut the US credit rating from AAA to AA+.

OSK Investment Bank Bhd vice president of futures and options Ryan Long was quoted as saying yesterday that the external market weakness was spilling over to palm oil.

“If the financial markets and everything else is going down, except gold, then I think palm oil has got no choice but to follow.

“Nobody will talk about the demand for palm oil for biofuel usage,” he added.

Meanwhile, Malaysian Palm Oil Board (MPOB) director-general Choo Yuen May said on Monday that the output in Malaysia, the world's second biggest grower of oil palm, could increase to 18.3 million tonnes this year from 17 million tonnes last year.

The average CPO price this year was slated at RM3,220 per tonne, she added.

The MPOB is expected to release its latest July statistics on exports, production and stock today.

MIDF Research is revising downwards its average CPO price forecast this year due to uncertainty in the global economic conditions and expectation of higher CPO production.

“We are reducing the average CPO price forecast for 2011 and 2012 by 5.8% and 10% to RM3,200 per tonne (from RM3,400 per tonne) and RM2,700 per tonne (from RM3,000 per tonne),” it said.

However, it is maintaining a “positive” call on the plantation sector given the expectation of a higher profit margin to be realised by most planters.

“Our new average CPO price forecast of RM3,200 per tonne in 2011 is 16% higher than that realised in 2010,” it noted.