MIDF RESEARCH MAINTAINS CPO PRICE FORECAST OF RM3,000 PER TONNE FOR 2021

KUALA LUMPUR, May 11 -- MIDF Research has maintained its positive stance on the plantation sector with crude palm oil (CPO) price forecast of RM3,000 per tonne for this year.

In a note, it said the existing landscape of CPO market would lead to a strong increase in its price, as it believes the subdued inventory level of palm oil in Malaysia would also act as a catalyst to CPO price.

The research house anticipates tight soybean supply to lead to stronger soybean price, which, in turn, should drive CPO selling price higher. 

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"We expect the inventory level to stay below the two million level in view of the slower production period. We also believe the palm oil supply tightness situation will likely remain until the second quarter of the financial year 2021 (2QFY21), given the weaker output during the post-peak production.

"Nonetheless, we expect the production to recover in the second half of the financial year 2021 (2HFY21), though below potential, given Malaysia's high reliance on foreign workers," the MIDF said.

On the export demand, the research house expects recovery on the back of positive economic activities globally and higher export demand from China as red palm oil is allowed to enter the country following the approval of new standards for premium palm oil.

MIDF noted that higher export demand from Saudi Arabia as Malaysia has clinched a palm oil deal. 

In the CPO futures market, prices have rallied to its highest in over 10 years to above RM4,000 per tonne amid strong market sentiment and the rally in the soybean oil market.

Another research company, Kenanga Research, however, has maintained its 'neutral' rating on the plantation sector with an unchanged 2021 CPO price forecast but believes the peak will occur soon.

The research firm said markets should be mixed as participants digest the contrasting bearish Malaysian Palm Oil Board (MPOB) inventory data but bullish May 1-10 cargo surveyors’ data.

In May, Kenanga Research projected production growth to increase by 4.6 per cent month-on-month (m-o-m), as East Malaysia continued its growth trajectory and exports to rise by 19.6 per cent m-o-m ahead of the Islamic festive season and potential stockpiling activities from China and India. 

"We expect total demand to outstrip total supply leading to lower ending stocks of 1.46 million tonnes equivalent to 5.6 per cent m-o-m drop," it said.  

-- BERNAMA