November crude palm oil price seen at RM2,600-RM3,200 a tonne

PETALING JAYA: Crude palm oil (CPO) prices are expected to trade in the range of RM2,600-RM3,200 a tonne in November, while palm oil stocks are projected to rise by 2 per cent month on month to 1.62 million tonnes at the end of this month, with output and exports down by 5 per cent and 15 per cent, respectively, month on month.

In a note, CGS-CIMB said it expects exports to slow down post festive demand and the sharp rise in CPO prices may have led to some demand rationing.

“We raise our average CPO price to RM2,620 a tonne for 2020 from RM2,500 a tonne in view of the stronger-than-expected CPO price achievement over the past month. Key factors influencing prices are the La Nina impact on oilseeds and palm oil supplies, China’s purchases to build up its stock reserves, and policies on biodiesel mandates,” it said.

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In October, Malaysia’s palm oil stocks fell 9 per cent month on month and 33 per cent year on year to their lowest since June 2017, at 1.57 million tonnes as at end-October 2020.

“Stockpiles remain low compared to historical levels; the average palm oil stock level in Malaysia at end-Oct for the past 10 years has been around 2.2 million tonnes. The tight stockpile level and low supplies of other edible oils will likely keep CPO prices supported,” the research house said.

Conversely, Public Invest Research opined that CPO prices may soften in the coming months as they have reached uncompetitive levels compared with other vegetable oil prices.

The average CPO price in October increased from RM2,928 a tonne to RM3,026 a tonne, with the price strength likely due to the concerns over labour shortage, the emergence of La Nina and tight palm oil supplies.

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Third-quarter 2020 CPO prices averaged RM2,777 a tonne compared with RM2,018 a tonne for the same period last year.

“Palm oil exports grew for a second consecutive month with an increase of 3.8 per cent month on month to 1.67 million metric tonnes. The stronger exports were mainly driven by India (+13.1 per cent), Pakistan (+33.3 per cent) and US (+24 per cent), which were partly offset by weaker demand from China (- 24 per cent) and EU (-23.3 per cent).”

It also noted that CPO production saw the biggest monthly decline in nine months, down 7.7 per cent to 1.72 million tonnes.

“We think the production has peaked last month and may see further decline in the coming months. 

Production in Peninsular Malaysia and East Malaysia fell 11.2 per cent month on month and 3.5 per cent month on month, respectively. We also observed that production in Sabah (-6.5 per cent) and Sarawak (-14.5 per cent) showed a steep decline on a year-on-year basis, likely caused by the worker shortage issue,” it said.

The average CPO price in October increased from RM2,928 a tonne to RM3,026 a tonne.