Commodities : Price to Stay Stable

THIS year promises price stability for Malaysia’s crude palm oil
(CPO), tin, rubber, timber and cocoa, taking the cue from the highly

anticipated increase in the prices of most global commodities led by

crude oil and gold.

Analysts are speculating that crude oil will

average about US$80 per barrel, while gold is expected to hit a record

US$1,400 an ounce.

CPO

This

year, the market for the country’s star commodity will remain linked to

the price movements of crude oil and its chief rival, soybean, says

Malaysian Palm Oil Association (MPOA) chief executive officer Datuk

Mamat Salleh.

“If petroleum trades higher than the present

level, the palm oil price will trail at the projected RM2,800 or even

exceed RM3,000 per tonne,” he says.

Interestingly, international

palm oil price forecasters like Thomas Mielke (Oil World of Germany),

Dorab Mistry (India’s Godrej) and James Fry (LMC of London) are raising

their CPO price projections for 2010 to RM2,800, RM3,000 and RM3,200

respectively.

Although the direct use of palm oil for biofuel is

not making much progress on the domestic and export fronts, palm oil is

increasingly replacing other oilseeds for biofuel production in the

European Union. This will peg palm oil prices to the crude oil prices,

adds Mamat.

Palm oil prices have advanced 53% at an average

RM2,300 per tonne in 2009 as investors bought commodities as a haven

away from a weak dollar.

However, a key bearish factor for CPO

will be the large soybean harvests shaping up in South America. The US

Department of Agriculture forecasts world soybean stockpile in 2010 to

jump 35% to 57.1 million tonnes or 2.25 billion bushels.

Palm oil production this year is expected to reach 18 million tonnes, with an opening stock of about two million tonnes.

On

the high opening stock for 2010, Mamat says: “Using the rule of thumb,

the inventory requirement is 1½ month of the average monthly output at

1.5 million tonnes. The market should be able to accept the inventory

threshold of around two million tonnes.”

Given the projected

export volume of 16 million tonnes and a conservative CPO price

forecast of RM2,800 per tonne, Malaysia’s palm oil export earnings is

expected to recover above RM65bil in 2010.

Malaysian Palm Oil

Board chairman Datuk Sabri Ahmad is confident that demand for palm oil

certified under the Roundtable on Sustainable Palm Oil framework will

continue to increase.

He views dealing with sustainability

issues (such as climate change and deforestation) as the biggest

challenge for palm in 2010.

Source : The Star by Hanim Adnan

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