KUALA LUMPUR: Crude palm oil (CPO) prices will likely to hover between RM2,450 per metric tonne (MT) and RM2,550 MT this year, attributed to high inventory levels, unfavourable foreign exchange and adoption of the revised accounting policies.
Public Investment Bank believe the lower month-on-month (MoM) inventories were mainly due to lower production on shorter working days and were partly offset by a MoM decline in exports.
Malaysian palm oil inventory in February dropped 2.9 per cent MoM to 2.47 million MT, the lowest in four months.
The research firm said the spread between palm oil and soybean oil prices has narrowed recently, making palm oil less price competitive that could hurt demand.
Kenanga Research said plantation companies should see reasonable margins, despite the bearish price prospect and rising production environment.
“Our CPO prices projection remains well above the per-ton production cost of an efficient planter about RM1,400 per MT.”
Hence, analysts have maintained their 'Neutral' call on the plantation sector due to an anticipation of bearish CPO prices in the second-quarter and third-quarter this year, as well as the market tendency to underweight plantation stocks.
Kenanga expects palm oil production to rise 17 per cent to 1.57 million MT in March, paving the way for a production uptrend, likely until May until July, 2018.
It also said CPO exports to improve three per cent to 1.35 million MT in March, with abundant supplies coming on-stream and supportive shipments to other regions.
However, CPO exports could be hampered by higher Indian import tariffs.
Kenanga also expect the CPO stock levels to rise one per cent to 2.50 million MT in March due to improvement in production.
MIDF Research said has also maintained a 'Positive' view on plantation sector due to improved demand outlook for palm oil this year.
“We believe the good global economy growth in 2018 should lead to higher consumption per capita.”
The research firm believed that the demand should improve from April onwards as the winter has ended in the Northern Hemisphere, which lead to higher usage of palm oil.