CPO prices to range between RM3,320 to RM4,113 in 2021: Super Profit for Plantation Companies
KUALA LUMPUR (March 23): On the first day of Bursa Malaysia Derivatives Palm and Lauric Oils Price Outlook Conference & Exhibition (POC 2021), palm oil industry experts have forecast crude palm oil (CPO) prices to range between RM3,320 to RM4,112.50 a tonne in 2021.
During the virtual conference, UIE Plc Director and Board Member Harald Sauthoff said he expects the third-month palm oil futures contract on Bursa Malaysia to average at RM3,320 a tonne and trade between RM3,000 to RM4,000 a tonne in 2021.
Meanwhile, palm kernel oil (PKO) on a ‘CIF Rotterdam’ basis is expected to trade at an average of US$1,300 a tonne, and trade between US$1,080 (RM4,452.50) and US$1,500 (RM6,183.75) a tonne in 2021.
Sauthoff noted a “significant supply” increase will only be seen in the third quarter of 2021 (3Q21) and 4Q21. “This means that for now, we will see a further tightening in inventories,” he added.
Production-wise, he forecast Malaysian CPO production at 19.5 million tonnes in 2021, versus 19.1 million tonnes last year. He observed that there have been huge labour problems in the Malaysian plantation industry, and fresh fruit bunch (FFB) losses were seen in 2020, noting there is “no easy solution for the time being”.
Indonesia CPO production, on the other hand, is expected at 47 million tonnes this year, compared with 44 million tonnes in 2020 and 43.8 million tonnes in 2019.
Specifically, local palm demand in Indonesia will grow and benefit from the levies charged on the commodity, even without delayed government biodiesel schemes.
Meanwhile, U.R. Unnithan, the founder and chief executive officer at SUMWIN Group, is projecting an average CPO price of RM3,500 per tonne for the year 2021, as he sees supply pressure to continue until the second half of this year.
“I believe that the upside for CPO is largely driven by how we can manage the supply disruption that the production has been [experiencing],” said Unnithan, who is also the president of the Malaysian Biodiesel Association (MBA).
He noted the non-availability of workers during this pandemic has aggravated the palm oil situation in the Southeast Asia region.
Thus, should the vaccination drive really progress as planned, the labour shortage issue could be “taken out of the equation” by 3Q21 or 4Q21, and this, in turn, would make it difficult to sustain current price levels.
He opined that both supply, as well as demand, would be picking up by 3Q of this year, which would result in CPO prices declining.
“But you never know what other supply disruptions can happen. If anything on the vaccination drive does not succeed, or detrimental side effects, then we could be seeing a much higher price,” said Unnithan.
IP Specialities Asia Pte Ltd President Normal Ellard has forecast CPO for 2021 at between US$950 a tonne to US$1,000 a tonne. He is forecasting lauric oils to trade at US$1,250 to US$1,300 a tonne.
His forecasts are based on a post-pandemic bounce.
At market close, the third-month crude palm oil (CPO) futures contract was RM84 higher at RM3,927 a tonne.
Malaysian PKO inventory to be tight
In terms of Malaysian palm kernel oil (PKO), Sauthoff said he had underestimated the strong demand recovery seen in 3Q20 and 4Q20, resulting in tighter inventory than previously anticipated.
He singled out Malaysian PKO inventories as being tight, similar to levels seen in 2016/2017. Indonesian PKO inventories on the other hand, do not experience tightness and will continue to benefit from export duties on the lauric oil.
For 2021, growth for PKO will come from Indonesian local demand, compared to other destination markets, as they struggle to compete with Indonesia, as well as downstream markets for both food and oleochemicals.