Prices of crude palm oil are set to rise sharply in December quarter

After a sharp decline over recent quarters, prices of crude palm oil (CPO) are set to rise sharply in the quarter ending December. This is due to a forecast of decline in production and expectation of a revival in biodiesel demand in Indonesia, one of the largest producers.

CPO prices on the benchmark Bursa Malaysia fell around 5 per cent in the past month, to MYR (Malaysian ringgit) 2,048 a tonne last week for near-month delivery.

Experts at GlobOil 2019 link the movement in CPO price to several other factors. Such as weather patterns in India, B20 and B10 biodiesel mandates in Indonesia and Malaysia, respectively, the ongoing trade war between the United States and China, and soybean output in the Americas.

Experts forecast the price to hit MYR 2,500 a tonne or even higher by March 2020, around a fourth higher than now.

Analysts forecast India’s soybean output at 9 million tonnes this year, as compared to 10.5 million tonnes last year. Apart from late monsoon rain, the crop was damaged in floods across major growing regions. Rainfall even now has aggravated the crop damage. Some analysts even predict the soybean output to fall below 9 million tonnes towards 8 million tonnes this year.

With this, India’s vegetable oil import is set to hit 16.6-16.7 million tonnes or even more. In addition to soybean, the Indian government has also raised the MSP of other oilseeds, which is set to drive domestic oilseed and oil prices. With the ongoing US-China trade war having reduced Chinese soybean import in the past few quarters, leaving thereby huge global surplus, Indian exporters of oilseed and oilmeal might not find the global market competitive. Thus, India’s export of oilmeal might decline this year.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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