KUALA LUMPUR: Crude palm oil (CPO) prices will likely average RM2,573 a tonne, with the potential to reach a high of RM2,944 a tonne, this year, said Malaysian Palm Oil Council (MPOC) chief executive officer Datuk Dr Kalyana Sundram.
“Our output projection for 2020 is 19.6 million tonnes, while global stock usage ratio is 14.68 per cent. As a result of this higher demand and uptrend in prices recently, we are bullish on the ‘high’ that the commodity can reach in 2020.
“The lowest price it will likely go is around RM2,152 a tonne but I do not think it will touch this low,” he said at a webinar titled “Market Recovery after Pandemic and Prospects of Further Growth”.
He said previously, the council had projected for CPO prices to average around RM2,337 a tonne for 2020, while the high and low levels were RM2,594 and RM2,080 a tonne, respectively.
Commenting on Malaysian CPO performance during the January to June 2020 period, he said production declined 7.55 per cent to 9.05 million tonnes compared with 9.79 million tonnes in the same period of 2019, while exports declined 17 per cent to 7.80 million tonnes from 9.39 million tonnes as a result of the Covid-19 pandemic.
“However, we witnessed a significant increase in the prices for CPO traded, which was 24 per cent higher at RM2,482 during the period from RM1,996 recorded in Jan-June 2019.
“We are also seeing over 21 per cent reduction in our CPO stock, which currently stood at 1.9 million tonnes. As a result, we seem to be doing well despite the lower production,” he said.
While exports were low in the first few months of the year due to the pandemic, fortunately, there was a significant uptick in exports seen in May to July this year as consuming countries had to replenish their CPO stocks, he said.
Meanwhile, when asked on the European Union’s possible move to set new limits on food contaminant 3-MCPD esters, found in refined fats and oils, he said the Malaysian palm oil industry was ready to meet those regulations when it became law.
He said the Malaysian government had initiated a major research and process grant to the industry to find avenues or processing technology that could reduce the content of 3-MCPD in Malaysian palm oil, and this had led to significant success.
“For example, we are looking at processes to wash the crude oil at the mill so that the content of chlorine is reduced, because we know that chlorine is the trigger for 3-MCPD. Certain changes are also being done in the refining stage,” he said.
Another speaker, Refinitiv Agriculture Research senior analyst Dr Tan Kian Pang, said with the current bullish momentum, CPO futures in Malaysia could test the RM2,800 a tonne price level this year since a majority of the economies had reopened, thus providing optimism to the market.
“Moving forward, we expect to see rising demand from key destinations as they are replenishing stocks in preparation for upcoming festivals, such as Mid-Autumn Festival and Deepavali,” he added. — Bernama