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Last Updated: 21 February 2024

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KUALA LUMPUR: BMI Country Risk & Industry Research (BMI), a product of Fitch Solutions Group Ltd, has made an upward revision to its forecast for the average price of Bursa Malaysia-listed third-month palm oil futures contracts in 2024 to RM3,750 per tonne from RM3,515 per tonne previously.

It said in a statement that in part, this reflects the subsequent persistence of price strength that started in the third quarter (3Q) of 2023, which saw contracts rose by 23.2 per cent between start-June and start-September.

At the same time, it said palm oil prices have more or less traded within five per cent of RM3,851 per tonne (+/- RM193 per tonne) since mid-2022.

Its revised forecast, however, does point to a softening of prices from its current levels through 2024, with palm contracts having traded at an average level of RM3,830 per tonne up to Feb 14, 2024.

"In the short term, we consider palm oil prices to be capped in light of price trends in the wider edible oils complex, expectations for large soya bean harvests in major producers and weak demand in China.

"Moreover, the impact of the El Niño event, now expected to dissipate between April and June 2024, on cultivation conditions in Indonesia and Malaysia is thought to be quite subdued," said BMI.

Meanwhile, the expected transition to La Niña conditions between June and August 2024 could weigh on market sentiment, testing price support.

BMI viewed that average palm oil prices would fall in 2025 relative to 2024, a reflection of a high base as well as the potential for a La Niña event to support oil palm cultivation, but at the same time have made an upward revision to its price forecast, now projecting that contracts would trade at an average level of RM3,500 per tonne.

However, it also reinforced the tail end of its price outlook in order to reflect a deceleration in the rate of palm oil export growth in Indonesia and Malaysia, which reflects the former’s commitment to higher domestic biodiesel blending mandates as well as a shift in oil palm production growth drivers in both markets.

"In our view, the world palm oil market will generate a production surplus of 2.0 million tonnes in the 2023/24 season, a three-season low.

"We forecast that this surplus will increase through the medium term, anticipating a surplus of 2.5 million tonnes in the 2024/25 season and season-on-season increases of 0.2-0.3 million tonnes thereafter," it said.

In terms of price, it maintained that average annual palm oil prices would decline through its forecast period, projecting mean prices of RM3,400 per tonne in 2026, RM3,300 per tonne in 2027 and RM3,205 per tonne in 2028.

Risk factors to its outlook include the development of biodiesel policies, the evolution of alternative edible oils’ prices and sustainable production efforts. – Bernama

https://www.thestar.com.my/business/business-news/2024/02/20/bmi-revises-2024-forecast-for-palm-oil-futures-contracts-to-rm3515-per-tonne

Sumber : The Star

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Last Updated: 19 February 2024

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KUCHING: Malaysia is on the right track to obtain the European Union’s (EU) "green light” in the near term for the recognition of the Malaysian Sustainable Palm Oil (MSPO) certification scheme, says Deputy Prime Minister Datuk Seri Fadillah Yusof.

Fadillah, who is also the Energy Transition and Water Transformation Minister, said the EU leadership is expected to make the announcement by June at the latest.

"We want MSPO to be recognised so that our smallholders are not left out or marginalised following the implementation of the EU Deforestation Regulation (EUDR).

"This is good news. With our MSPO being recognised by the EU, locally-produced commodity products would not be required to be audited by them,” he told reporters after the 2024 annual grant handover ceremony for the Petra Jaya federal constituency’s village development and security committees (JKKKs) here today.

He said this was shared during a brainstorming session with an EU delegation that has been in the state since last Wednesday for the launch of Invest Sarawak and Business Day programme.

In May last year, Fadillah, who was then holding the Plantation and Commodities Minister portfolio, jointly led a mission to Brussels, Belgium, to convey the stance of the Council of Palm Oil Producing Countries (CPOPC) members on the EUDR implementation.

As a CPOPC member, he said, Malaysia is committed to be involved actively through the platform and continue the agenda of countering Western countries’ negative campaigns against palm oil.

At the ceremony on Saturday (Feb 17), Fadillah, who is also the Member of Parliament for Petra Jaya, presented grants totalling RM255,000 to 85 JKKKs under his constituency. - Bernama

https://www.thestar.com.my/news/nation/2024/02/18/malaysia-on-right-track-for-mspo-recognition-from-eu-says-fadillah

Sumber : The Star

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Last Updated: 15 February 2024

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KUALA LUMPUR, Feb 14 ― Kenanga Research has forecast the price of crude palm oil (CPO) to trade range-bound and average around RM3,800 per tonne in a tight outlook for edible oils in 2024.

The research house said that with supply matching demand or possibly dipping into a small deficit, the commodity is expected to end the year with inventory coming in below the level it started at.

“The main issue is demand for edible oils which is underpinned mainly by population and income growth that is expected to continue growing at 3-4 per cent year-on-year (y-o-y), but supply is affected by tightening regulations, unpredictable weather and even geopolitical disruptions.

“Specifically for palm oil, Indonesia, the top producer and also user, looks set to manage exports till Hari Raya in April while India, a big palm oil importer, is likely to maintain generous levels of inventory pending an election in the first half of this year,” it said in a research note, maintaining a “neutral” call on the plantation sector.

RHB Investment Bank Bhd also maintained its neutral call on the plantation sector with the expectation of a higher CPO price environment in the first half of 2024.

The investment bank said it believes seasonally weaker output and the El Nino impact are anticipated to lower production in the months ahead.

“Although production is set to taper off in the coming months, export market demand may make a comeback in anticipation of the Aidilfitri festivities and restocking activities as stock levels should run down further. The anticipated stronger demand in the export market could lead to Malaysian palm oil stocks dropping below the two million tonne mark by next month, thus providing a boost to CPO prices,” it added.

Meanwhile, Public Investment Bank Bhd noted that despite the declining inventory trend, palm oil prices have remained range-bound in the last few months.

“Given the shorter working month in February, we expect inventories to fall below the psychological two million tonne level by end-February,” said the bank, which is also neutral on the plantation sector. ― Bernama

https://www.malaymail.com/news/money/2024/02/14/analysts-neutral-on-plantation-sector-with-crude-palm-oil-seen-averaging-rm3800-per-tonne/117962#google_vignette

Sumber : Malay Mail

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Last Updated: 09 February 2024

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PETALING JAYA: The earnings of plantations companies will be on the back foot for the final quarter of 2023 (4Q23) due to weaker crude palm oil (CPO) prices during the period.

The sector could, however, see a new normal with CPO prices trading between RM3,000 and RM4,000 a tonne due to supportive fundamentals.

RHB Research expects 4Q23 earnings for the sector to decline quarter-on-quarter (q-o-q) and year-on-year (y-o-y) as production output declines post peak season and the down trending CPO prices having a higher leverage on earnings of companies.

Industry insiders expect the bearish forces could remain for much of 2024 but for CPO to hold above the RM3,000 per tonne price level, helped by sustained demand from main markets like China and India, which will help offset weaker exports to developed markets like the European Union.

“Based on the current fundamental factors such as CPO production stagnating at 18 million tonnes to 19 million tonnes in Malaysia, soybean oil prices remaining above US$900 per tonne and palm oil exports remaining stable, the CPO price range of RM3,000 to RM4,000 is considered normal,” said Datuk Dr Ahmad Parveez Ghulam Kadir, director-general of Malaysian Palm Oil Board.

He has no major concerns about Indonesia CPO production, estimated at 46 million tonnes last year, as there is no strong correlation with Malaysian CPO prices, he added.

“Even though Indonesian CPO production keeps increasing every year, their domestic consumption is also on an increasing trend due to their aggressive implementation of the biodiesel industry and higher demand for edible consumption.

“As a result, Malaysian palm oil exports remain stable in the world markets,” Ahmad Parveez told StarBiz.On the supply side, with cultivated area in Malaysia and Indonesia about to plateau, production growth will be driven by better seeds and plantation practices. One major issue is wage pressure.

“Compared with historical levels, one key factor supporting higher CPO prices is cost inflation, especially for labour,” said Akash Gupta, director at Fitch Ratings Singapore Pte Ltd.

Malaysia has a minimum wage of RM1,500 and the government is working towards a progressive wage policy to raise wages of low-income workers.

Akash’s Malaysian spot benchmark CPO price assumption is US$650 per tonne (around RM3,100) for 2024, and US$700 per tonne (around RM3,300) for 2025, as compared to US$830 per tonne (around RM3,950) in 2023.

He expects CPO prices to weaken in 2024 due to higher output as well as pressure from competing oils such as soybean oil.

“We see higher production in Malaysia, with the resolution of labour shortages which were caused by Covid-19-related restrictions. We also see favourable weather conditions for higher yields, at least in the next four to six months across Malaysia and Indonesia.

The effect of a strong El Nino, if it materialises, should start to be felt from late 3Q24 or early 4Q24 onwards. “Lower cost of fertilisers should also help raise output and weaken CPO prices,” he said.

Ahmad Perveez advised to keep an eye on crude oil prices as higher energy prices tend to make palm oil a more attractive option for biodiesel feedstock.

The weak ringgit against the US dollar also makes CPO more competitive than other competing oils.

The major immediate pressure on CPO price could be brewing in the soybean oil market with the price differential between the two edible oils having narrowed to US$200 a tonne from about US$550 a tonne in September last year.

The narrower spread between the two vegoils could lead to buyers opting for soybean oil purchases while Fitch expects this to encourage higher discretionary biodiesel blending.

With the earnings season set to get underway on Bursa Malaysia, RHB Research noted that the 4Q23 earnings of plantation companies could ease due to lower production and pricing power, especially among upstream companies.

“In Malaysia, while average fresh fruit bunch (FFB) output rose by 4.5% y-o-y in 4Q23, spot CPO prices dropped 5.8% y-o-y. In Indonesia, FFB output is estimated to have risen 3.4% y-o-y in 4Q23, but net CPO prices fell 11.1% y-o-y,” it noted in a report yesterday.

That said, the industry’s 4Q23 performance is likely to be largely in-line with its expectations, based on estimates of production levels alone.

Kuala Lumpur Kepong Bhd  may underperform its forecast based on FFB output with FGV Holdings Bhd  outperforming while others post numbers that are largely in line.

It added Malaysian companies with downstream operations may see slightly better q-o-q margins due to the decrease in competition from Indonesia.

Unlike Fitch, RHB Research expects a higher CPO price environment in the first-half of the year in anticipation of a seasonally weaker output and the El Nino impact.

The industry’s longer sustainability is an ongoing effort, with Ahmad Parveez noting it has been proactive in diversifying its application portfolio by exploring and investing in alternative markets where the demand for palm oil is growing.

“This includes sectors such as renewable energy, and oleochemicals products by creating eco-friendly products ranging from detergents to personal care items.

The bioplastics industry presents a novel opportunity for palm oil utilisation, offering a biodegradable alternative to conventional petroleum-based plastics. Most importantly, there is a focused effort on enhancing the value of palm oil in the food industry,” he said.

https://www.thestar.com.my/business/business-news/2024/02/08/planters-4q23-earnings-forecast-to-decline

Sumber : The Star