Alliance Research expects the crude palm oil (CPO) price to average RM2,600 a tonne for the rest of the year, under presupposition by healthy demand and tight supply of other oilseeds.
The research team said the CPO price had averaged only RM2,312 a tonne to date.
With the month of Ramadan commencing in July, they expected some festive season pre-stocking to occur in June, and possibly extend into July.
Other reasons for CPO price expected to increase are:
- Higher demand in Malaysia Indonesia
- Exports to India and Pakistan pick up during this period
- opportunity for CPO prices to break the RM2,500 per metric tonne level on improved demand
- Alliance Research also expects inventory levels to normalise going forward, as exports stay ahead of production.
The research also found that cumulative production for the four month calendar year 2013 was 12.8 per cent higher year-on-year, despite the seasonal downtrend in production last year.
The research house also stated few other key points on the crude palm oil price:
- Drivers for improved production were the favourable weather which yielded adequate moisture levels
- Exports started to pick up from February this year and had surged ahead of production.
- Exports have been driven by low availability of other oilseeds like sunflower, rapeseed, and soybean.
- Outlook on competing edible oils continues to point to tight supplies results in substituting with palm oil
The research house has upgraded the plantation sector’s call from “underweight” to “neutral” with the overall outlook that healthy demand in the second half of this year will see CPO prices trending higher.
There are the top ''buy'' and ''sell'' call for the sector with IJM Plantations being a top pick for 'buy', and Felda Global Ventures continues to be the top ''sell''.
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