Crude Palm Oil prices may improve marginally in the first quarter of 2019 despite end 2018 inventory recording an all-time high of 3.215m tonnes in December.
Data from MPOB indicates that Malaysia’s CPO production is on a weakening trend due to seasonality, decreasing 2% on month in December 2018, bringing 2018 output to 19.5 million tonnes. Meanwhile, an uptick in monthly demand from Asian markets has helped offset a drop in exports to the EU, US and select Asian countries. However, these may not lend to a sustained rise in the price of the commodity.
Key short-term factors which may lend to an upward trajectory in CPO price include:
a) India’s decision to cut CPO import duties to 40% from 44% and RPO to 50% from 54% effective January 2019. India estimates on-year palm oil import growth of 9.5% to 9.3m tonnes vs Oil World’s projection of 8.96m tonnes;
b) China’s palm oil imports rose 23% year-to-date Nov with edible oil imports registering a 7.1% rise over the same period despite ongoing US-Sino trade spat. Positive outcome in ongoing negotiations between the economic superpowers may provide and additional leg-up to CPO demand and prices as consumption patterns normalize;
c) The probability of El Nino occurring in the first quarter of 2019 has fallen to 91% from 96% but expected to be moderate in strength, according to University of Columbia; and
d) According to Trading Economics global macro models and analysts expectations, Palm Oil is expected to trade at MYR1,800/MT by the end of 1Q2019 and is estimated to be trading at MYR1,900/MT in a year’s time.
Giri Balakrishnan
Business Development/Analyst
AgriNexus International