Prices of crude palm oil are set to rise sharply in December quarter

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After a sharp decline over recent quarters, prices of crude palm oil (CPO) are set to rise sharply in the quarter ending December.


This is due to a forecast of decline in production and expectation of a revival in biodiesel demand in Indonesia, one of the largest producers.


CPO prices on the benchmark Bursa Malaysia fell around 5 per cent in the past month, to MYR (Malaysian ringgit) 2,048 a tonne in early Thursday trade for near-month delivery.


Experts at GlobOil 2019 link the movement in CPO price to several other factors. Such as weather patterns in India, B20 and B10 biodiesel mandates in Indonesia and Malaysia, respectively, the ongoing trade war between the United States and China, and soybean output in the Americas.


“We are very bullish about CPO prices. Other than the season and late season monsoon rainfall hitting soybean output in India, the biodiesel mandate in Indonesia is going to be a big booster. It has already started indicating in terms of price movement of soybean and rapeseed, which have never been equal,” said Dorab Mistry, director, Godrej International.


Experts forecast the price to hit MYR 2,500 a tonne or even higher by March 2020, around a fourth higher than now.


James Fry, chairman of London-based LMC International, forecasts India’s soybean output at nine million tonnes this year, as compared to 10.5 mt last year. Mistry thinks it will be even lower. “Interactions in the field have presented an even worse picture. Apart from late monsoon rain, the crop was damaged in  floods across major growing regions. Rainfall even now has aggravated the crop damage. So, India’s soybean output will remain even below nine mt, maybe towards eight mt this year,” he said.


With this, India’s vegetable oil import is set to hit 16.6-16.7 mt or even more.


“Also, the economic stimulus announced by the government will be positive for the entire Indian economy. This will translate into more edible oil consumption in India next year,” said Mistry.


Thomas Mielke, a Germany-based and veteran edible oil analyst, attributes the soybean price rise to increase in the minimum support price (MSP) by the Indian government. “In addition to soybean, the Indian government has also raised the MSP of other oilseeds, which is set to drive domestic oilseed and oil prices. With the ongoing US-China trade war having reduced Chinese soybean import in the past few quarters, leaving thereby huge global surplus, Indian exporters of oilseed and oilmeal might not find the global market competitive. Thus, India’s export of oilmeal might decline this year,” he felt.


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