KUALA LUMPUR: Plantation stakeholders might witness a retreat in crude palm oil (CPO) prices, dipping to the trading range of RM3,800 to RM4,000 per tonne throughout April and May, attributed to the abundant supply of soybeans from the United States flooding the global market.
Additionally, the gradual seasonal resurgence of palm oil production in Malaysia is contributing to the downward trend in CPO prices.
The Malaysian Palm Oil Council (MPOC) stated last month that a 0.11 per cent increase in global palm oil production is expected. On the other hand, increases in the production of soya bean oil are expected to reach 2.88 per cent, rapeseed oil to 3.48 per cent, and sunflower oil to 3.94 per cent.
With regard to inventory, MPOC reported that, in February 2024, Malaysian palm oil stocks continued their downward trend, falling by 5.0 per cent to 1.919 million tonnes, the lowest stock since July 2023.
Hong Leong Investment Bank Bhd (HLIB Research) maintains a neutral stance on the sector, given the absence of notable demand catalysts.
It said that the latest planting intention for soybeans and the 9.0 per cent year-over-year increase in the United States Department of Agriculture's (USDA) soybean inventory signal sufficient soybean supply in the coming marketing year, hence capping near-term prices of soybean and crude palm oil (CPO).
USDA's prospective planting report states that US farmers intend to plant 90 million acres of corn (-4.9 per cent vs. 2023's planted acreage) and 86.5 million acres of soybean (+3.5 per cent vs. 2023's planted acreage).
The projected corn planted area came in slightly below the average trade estimate of 91.8 million acres, while the projected planted area for soybeans came in within the average trade estimate.
HLIB Research said the shift towards more soybean over corn areas is possibly due to a downtrend in corn prices amid ample global supplies and sluggish demand for US exports.
Prospective planting aside, it said that palm's narrowed price discount against soy oil (US$110 per metric tonne (mt) currently versus the six-month average of US$258/mt), palm's impending seasonal output recovery, and the absence of a notable demand-push catalyst indicate that the current high CPO price will not sustain itself over the longer term.
"CPO prices have appreciated by 23.7 per cent to RM4,511 metric tonne bringing year-to-date (YTD) to an average RM4,042 metric tonne on the back of weak production prospects and tight supplies.
"We are maintaining our 2024 and 2025 CPO price assumptions of RM4,000 per tonne and RM3,800 per tonne (respectively), with the view that CPO prices will start tapering off when palm's seasonal output recovery takes place by April/May," it said in a note.