Will CPO prices remain high for the rest of the year?

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Crude Palm Oil Prices Expected to Remain Elevated for the Foreseeable Future

Crude palm oil (CPO) prices are anticipated to stay at an elevated level for an extended period, with the average price for the current year projected to trade between RM3,400 and RM3,600 per tonne. While a level of RM4,000 per tonne is considered a significant psychological threshold, prices are not expected to surpass RM5,000 per tonne in the near term. This sustained high pricing is largely attributed to ongoing production challenges that are constraining overall yield, even as the industry enters its peak season.
Sustained High Pricing Outlook

Palm oil trader David Ng indicated that CPO prices are likely to settle into a "new normal" range, characterised by sustained high values over a considerable duration. This outlook suggests a departure from previous price cycles, with current market conditions favouring continued strength in CPO values. The RM4,000 per tonne mark is identified as a key psychological level that will be closely watched by market participants.
Production Constraints Impacting Yield

Despite the current period being the peak season for palm oil production, various issues are reportedly hampering overall yield. These production challenges are a significant factor in supporting current price levels. The output of crude palm oil for 2021 is estimated to fall between 18.3 million and 18.7 million tonnes, representing a reduction of approximately six per cent compared to the previous year.
New Futures Contract to Aid Price Discovery

In conjunction with these market dynamics, Bursa Malaysia Derivatives is planning to launch a new palm oil futures contract, the East Malaysian Palm Oil Futures (FEPO), in the third quarter of the year. This new contract aims to provide greater price discovery and a viable option for physical delivery, particularly benefiting players in Sabah and Sarawak, which together account for about 45 per cent of Malaysia's CPO production. The FEPO will mirror most specifications of the existing Crude Palm Oil Futures (FCPO) contract but will feature distinct trading hours, delivery points, and speculative position limits.

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Will CPO prices remain high for the rest of the year?

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