09.10.2020 (www.nst.com.my) - KUALA LUMPUR: Market observers are mostly optimistic on the palm oil sector's outlook in 2021 and with pessimism stance on crude palm oil (CPO) forecast price at RM2,500 per tonne in 2020.
The outcome was addressed in a Tri-Star Mega Webinar conference on Thursday, organised by Solvent Extractors Association Of India (SEA) & Globoil India with about 750 participants from across the global oils and fats industry.
Godrej International director Dorab Mistry believes the vegetable oils market should trade sideways at best or slightly lower until the US election result.
He said the average price of vegetable oils in 2021 should be higher than 2020.
Kenanga Research analyst Adrian Kok concurred with the general bearish near-term view given the loss of competitive edge against soybean due to narrow soybean oil-palm oil spread of US$16 per tonne.
"Uncertainties in the implementation of biodiesel mandates stemming from wider palm oil-gasoil of US$376 per tonne and steep decline the futures curve (RM400 per tonne) also lead to bearish outlook," he said in a research note today.
He said edible oil demand was expected to recover in 2021, despite expectations of La Niña boosting production.
LMC International chairman Dr James Fry said CPO price was at the peak of the price band (palm oil-crude oil) of US$425 per tonne and without crude oil prices moving higher, it limits the upside of CPO price.
Oil World chief executive officer Thomas Mielke has predicted CPO price at RM2,900 per tonne for the first-half of 2021.
"While we agree with the view that edible oil demand should return in 2021 (post-virus), there is a risk to shortfall of the implementation of biodiesel mandates in countries aside from Indonesia that has indicated its commitment to the successful implementation of its B30 mandate. As such, we are keeping our 2021 CPO price forecast unchanged for now," said Adrian.
The research firm has retained its production forecast for Malaysia CPO at 19.5 million tonne, 1.8 per cent contraction year-on-year (YoY).
"With year-to-date (eight-month), CPO production stood at 12.7 million tonne."
Dorab had also reiterated CPO production forecast around 20 million tonne in 2020.
He said this was likely to result in inventory levels rising gradually in the coming months, which should exert pressure on CPO price in the near-term.
"While we are turning more optimistic on the sector's outlook in 2021, we see downside to CPO price in the very near-term which should result in increased share price volatility."