Subdued Production of CPO Forecast

PETALING JAYA: Production of fresh fruit bunches in 2010 may remain subdued due to below average rainfall in Malaysia and Indonesia, according to Maybank Investment Bank. In a report yesterday, it said it could also be due to lag output effects on lower fertilisation applications in the fourth quarter last year and a weak to moderate El Nino outlook till February 2010. “Our revised CPO (crude palm oil) price assumption for 2010 factors in a weak to moderate El Nino,” it said. It said in recent weeks, the probability of a strong El Nino had been downplayed. But should it materialise, CPO prices could touch RM3,000 per tonne and average higher for 2010. Demand from India and China would stay strong due to the recent monsoon in India and severe droughts in parts of China, it said, adding that muted production outlook and strong demand combined to result in a tight supply in 2010 leading to an improvement in prices. “We raised our CPO price assumptions to RM2,250/tonne (2009) and RM2,400/tonne (2010-11) from RM2,000/tonne (2009-11),” it said. The CPO price has stayed firm at RM2,255/tonne but is seen to trend higher in 2010 on tight global inventory level, economic recovery and as a commodity hedge against a secular downtrend in the US dollar, it said. Source : The Star

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