KUALA LUMPUR: There has been a “fueling” optimism on the plantation sector with experts forecasting higher crude palm oil (CPO) price for the first half of next year.
According to Public Investment Bank Bhd (PublicInvest), majority of the industry experts at the recently-concluded 15th Indonesian Palm Oil Conference and 2020 Price Outlook were turning positive on the commodity price with a range of RM2,600-RM3,000 a tonne for January-June period.
The research firm said this was mainly underpinned by the expectation of falling global palm oil inventories as they see few key catalysts from the supply and demand factors that could contribute to a lower stock level in Malaysia and Indonesia.
As at the recently-concluded 15th Indonesian Palm Oil Conference and 2020 Price Outlook, in Bali, Oil World executive director Thomas Mielke expected palm oil prices to rise to RM2,600 a tonne in the first half of 2020.
Mielke predicted a decline in Malaysian production next year and Indonesian production rising to 45.4 million tonnes, the weakest growth in a decade.
He also expected global palm oil stocks to fall by 2-3 million tonnes in the next one year.
“We also share the similar views as the industry experts as we generally see tightening palm oil inventories in the coming months, hence, we had upgraded our sector outlook to ‘overweight’ early last month,” PublicInvest said.
In the near term, the firm expects CPO prices to see some profit-taking before testing higher levels.
PublicInvest said biodiesel may become the key growth driver for palm oil demand.
The firm said Indonesia’s increased mandated bio-content in biodiesel to 30 per cent next year, up from 20 per cent will likely boost the palm oil usage for biodiesel from an estimated 5.7 million tonnes this year to about 8.1 million tonnes, making up 19 per cent of annual production next year.
Malaysia also aimed to boost local consumption of palm biodiesel from 700,000 tonnes to 1.3 million tonnes a year as it gradually shifts from the B10 mandate to B20, it added.