What factors will keep CPO prices stable at RM3,700 per tonne?

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Crude Palm Oil Prices Expected to Hold Steady at RM3,700 Per Tonne

Crude palm oil (CPO) prices are projected to remain stable at RM3,700 per tonne for the 2023/2024 period. This forecast is underpinned by a balanced interplay of improving supply and a robust pick-up in demand. While seasonal increases in inventory may occur, these are anticipated to be transient, with underlying market fundamentals supporting the price stability.
Improving Supply Dynamics

The supply side of the palm oil market is experiencing an uptick, contributing to the anticipated price stability. Although specific details on the drivers of this supply improvement are not elaborated upon, the overall trend indicates a more readily available quantity of CPO. This increased availability helps to temper price fluctuations and supports the RM3,700 per tonne projection.
Strong Demand Pick-Up

Concurrently, demand for CPO is showing a significant recovery. This strong demand is a crucial factor in absorbing the available supply and preventing downward price pressure. The robust consumption patterns are expected to keep the market in equilibrium, reinforcing the stable price outlook.
Challenges and Moderating Costs

Despite the stable price outlook, the palm oil industry faces certain headwinds. Stiffer competition from Indonesian producers, exacerbated by excess inventory during festive periods, presents a challenge. Furthermore, the South American region is experiencing a bumper harvest of soybeans, which can impact global vegetable oil markets. However, a substantial reduction in fertiliser costs, which constitute approximately 30 per cent of total production expenses, offers a positive offset. The downstream sector, particularly oleochemicals and refining, is navigating a challenging outlook due to weaker demand and margins, leading to expectations of weaker financial performance in the second quarter of 2023. Nevertheless, improvements in productivity and moderating costs are expected to lead to better earnings in the latter half of the year.

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What factors will keep CPO prices stable at RM3,700 per tonne?

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