PALM OIL INDUSTRY PLAYERS RAISE CONCERN OVER LIMITED SUPPLY GROWTH FROM INDONESIA, MALAYSIA

Palm oil industry players raised their concerns over the limited supply growth from both Indonesia and Malaysia, which could drive the crude palm oil (CPO) prices higher moving forward, said Public Investment Bank Bhd.

The research house said in a note that during the Palm and Lauric Oils Conference 2024 (POC2024) recently, the majority of the speakers opined that the CPO price would break above the RM4,000 per tonne level in the near term.

“Most industry experts have a bullish view on the CPO price in 2024 but mostly think that it will trade lower in the second half of 2024 (2H2024), while two notable palm oil experts have a bullish view on the CPO prices, citing the limited palm oil supply growth in the top two producing countries.

“However, their concerns are in contrast with the local planters, who have mostly guided a double-digit production growth for this year,” it said.

Meanwhile, Public Investment Bank said the key focus at POC2024 is on the looming European Union Deforestation Regulation (EUDR), which will affect global commodity demand.

On EUDR, it said the new law in EUDR has included seven commodities within the scope of the EU regulation namely soy bean, beef, palm oil, wood, cocoa, coffee and rubber.

“Products of the commodities included in the regulation may only be placed or exported in or from the EU market if they can prove they are deforestation-free, produced in accordance with the relevant legislation of the country of production and covered by a due diligence statement.

“We think production from the smallholder plantation may have difficulty to be absorbed by the palm oil producers given the poor traceability and lack of transparency and their fresh fruit brunches (FFB) production might be absorbed at a discounted price to be sold to other regions,” it said. 

The research house added the posibility of La Lina in 2H 2024, changes of domestic market obligation and biodiesel mandate in Indonesia and weather abnormalities in North America which could pose a threat to soy bean supply will be the major wildcards towards CPO prices. 

Hence, Public Investment Bank has forecast CPO price to average at RM3,800 per tonne, closest to Palm Oil Analytics (Fastmarkets) managing director Dr Sathia Varqa's forecast of RM3,500-RM3,700 per tonne and chooses Ta Ann Holdings Bhd as its top pick.