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 Asian Crude Palm Oil Watch 4Q20

28.12.2020 (www.fitchratings.com) - Malaysian benchmark crude palm oil (CPO) spot prices touched USD900/tonne (t) in December 2020 for the first time since 2012 and averaged at around USD810/t in 4Q20 to date. This was significantly higher than the USD660/t average in 3Q20. Prices in 2H20 were supported by weak output and low inventory in Malaysia, robust prices and outlook for a close substitute – soybean oil – due to market expectations of dry weather affecting supply and a recent hike in Indonesian palm oil export levies. However, there are indications that supply and inventory are picking up in Indonesia, which is the world’s largest CPO producer, and high prices are affecting demand from key constituents, such as Indian imports and Indonesian biodiesel. Fitch Ratings expects CPO prices to decline in 2021 on higher supply and assumes they will average USD560/t, despite some upside risk, such as weather. Divergent Trend in Malaysia and Indonesia Palm oil inventory in Malaysia shrank in November 2020 to its lowest level since June 2017 due to weak CPO output, which was 3% lower yoy. Output is down as estates in Malaysia, which depend on foreign workers for around 80% of their manpower, are facing labour shortages due to pandemic-related border restrictions. However, Indonesian output and inventory has been steadily rising in the last few months. Palm oil output in October 2020 jumped by 16% yoy while inventory rose by 14% month-on-month. Output is up due to better weather conditions and higher fertilizer input and should remain high in 2021.


Malaysian Palm Oil Board ( MPOB ) Lot 6, SS6, Jalan Perbandaran, 47301 Kelana Jaya, Selangor Darul Ehsan, MALAYSIA.
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