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NEWS ADMIN

DATE

11/07/2018

NEWS PROVIDER

Nur Aisha Abd. Wahab

NEWS SOURCE

The Star Online

CATEGORY

HEADLINE

Rising stockpile to keep CPO prices under pressure

The Star Online (11/07/2018) - PETALING JAYA: Crude palm oil (CPO) prices are expected to stay under pressure, given the rising stockpile and weaker export outlook on the back of a stronger ringgit against the US dollar situation, say analysts.

The third-month benchmark CPO futures for September hit a two-year low in early trade before closing at RM2,259 per tonne yesterday.

Apart from the ongoing China-United States trade war tension, analysts pointed out that market sentiment was undermined by the bearish June palm oil statistics released by the Malaysian Palm Oil Board.

Analysts were taken by surprise over the sudden rise in the palm oil stock at 2.19 million tonnes in June, after its steady decline for five consecutive months.

Palm oil exports for the period under review also fell 12.57% to 1.13 million tonnes from a month earlier on weaker demand from China and the European Union.

However, CPO production for June dropped 12.63% to 1.33 million tonnes against 1.53 million tonnes in May.

One plantation analyst pointed out that the lower output in June was attributed to the palm fruit harvesters in Malaysia, of which about 70% of the Indonesian workforce had returned home for the Eid-al Fitr celebration.

There were fewer workers to collect the ripe palm fruits, hence disrupting harvesting in the plantations, throughout the celebration month.

CIMB Investment Bank in its recent palm oil stock preview for June said the fall in output was due to lower productivity.

“Many workers will take time off to celebrate the Eid-al-Fitr.

“Our survey revealed sharper production declines in Sabah estates, followed by Peninsular Malaysia while Sarawak estates posted the smallest drop in month-on-month production,” added the research unit.

CIMB Investment Bank has projected CPO prices to trade at RM2,200-RM2,400 per tonne this month and averaging at RM2,700 per tonne for 2018.

In another development, China’s imposition of 25% tariffs on US soybean imports on July 6 is likely to result in higher prices for soybean and soy-related products in China due to the additional taxes, and “these are likely to be passed on to consumers.”

The higher prices for soybean meal in China could result in weaker demand, leading to lower crushing activities, and this could indirectly benefit palm oil, said the research unit.

It added: “If China imposes additional tariffs on US soybean oil, this could also potentially benefit CPO as a cheaper alternative edible oil available to China.”

Read more at https://www.thestar.com.my/business/business-news/2018/07/11/rising-stockpile-to-keep-cpo-prices-under-pressure/