PETALING JAYA: Local investment banks are cautiously optimistic on palm oil prices, expecting it to surpass RM2,600 per tonne by mid-2018 from the current RM2,400, thanks to firm global demand.
“Global palm oil demand is expected to rise as the supply of its rival soybean is on a slight decline,” said MIDF Amanah Investment Bank Bhd senior analyst Alan Lim Seong Chun.
According to Oil World, dry weather in Argentina had slashed soybean supply by 32 per cent to just 37 million tonnes, for the current season.
This year, the US Department of Agriculture had estimated American soybean planted area to shrink by one per cent to 36 million hectares.
“These have caused soybean prices to rise in the past few months but the impact has not been translated into higher prices for soybean oil in view of sufficient vegetable oils inventory globally,” Lim told reporters at a market forum organised by the Malaysian Palm Oil Council (MPOC) here today.
Also present were MPOC chief executive officer Datuk Kalyana Sundram, MPOC marketing & market development director Faudzy Asrafudeen Sayed Mohamed and Bursa Malaysia Derivatives senior vice president of commodity derivatives product development Moriazi Mohamad.
Lim added that another compounding factor that is contributing to rising palm oil prices is heightened global demand for palm oil in preparation of Ramadhan month and the celebration of Eid among Muslim countries.
He noted that Malaysia’s palm oil stockpile was expected to settle at 2.13 million tonnes by end-April. “By mid-2018, palm oil prices is expected to surpass RM2,600 per tonne from the current average of RM2,400.”
RHB Investment Bank economist Vincent Loo expects palm oil prices to average at around RM2,550 per tonne as global usage of biodiesel increases, palm oil would tend trade in tandem with Brent crude oil futures which have been trading above US$70 ber barrel, for the past month.
Moriazi said the crude palm oil futures (FCPO) on Bursa Malaysia had recently been tweaked for the convenience of vegetable oils traders.
“We’ve increased FCPO’s position limits, added 30 minutes of trading time, added more contract months and allow for palm oil traceability to the respective mills,” he added.