Palm oil prices expected to reach a nine-year high in 2021

 

Malaysian palm oil production is expected to increase by 2.4% later this year.

PETALING JAYA: Palm oil prices have been forecast to reach an average of RM2,800 per tonne, the highest since 2012, compared to RM2,685 per tonne last year.

A Reuters poll of 18 industry players and analysts said Malaysia’s production is expected to rebound by 2.4% or 19.6 million tonnes during the second half of the year.

Indonesia’s palm oil production is also likely to recover and rise by 1.8% or 48.3 million tonnes. This comes after a contraction in global palm oil production in the last 12 months, due to heavy rains and labour shortages as a result of the pandemic.

However, Kwantas Corp general manager Christopher Chai predicted a more volatile market in 2021, as “crude palm oil prices have gone way beyond expectations”.

“The combination of improving supply and sales from the second half of 2021 will induce some price elasticity at work and reversals,” added Marcello Cultrera, who is institutional sales manager at Phillip Futures.

Participants of the poll have also warned of another “demand slump” following the rise of Covid-19 cases and reinstated lockdown measures around the world.

They say higher production rates but poor demand would lead to increasing stockpiles, which could suppress prices.

Analysts added that Indonesia’s B30 biodiesel mandate, made up of biofuel with 30% of palm oil, would also contribute to a swing in prices amid falling biofuel exports. - FMT