Trader: CPO price may retest RM4,400 high

KUALA LUMPUR: Crude palm oil (CPO) is expected to average at between RM3,400 and RM3,600 per tonne this year with a possibility to test the high of RM4,400 recorded in early May, according to an industry trader.

Iceberg X Sdn Bhd proprietary trader David Ng said as the industry entered peak season, CPO prices would be supportive in the near term, with RM4,000 as a key psychological support level.

Besides that, prolonged sluggish production into the second half (2H) of the year could push CPO price higher in months to come, Ng said at Bursa Malaysia Derivatives Bhd’s (BMD) East Malaysia Crude Palm Oil Futures (FEPO) contract pre-launch webinar today.

“Some millers are being affected by the recent Movement Control Order. Labour is a prevalent issue since many months ago and is also affecting into the output. I think demand is going to be pretty much robust in the 2H. The issue now is on production. If production still remain sluggish going into the 2H, prices would have to adjust accordingly,” he added.

Ng said while the price would stay high for quite some time, he did not expect it to go beyond the RM5,000 per tonne level.

On production, he said the crop’s output could hit a high of 18.7 million tonnes or a low of 18.3 million for 2021, which would be about six per cent fall from last year.

According to Reuters, Malaysian palm oil futures had fallen by four per cent on Monday to a more than one-week low, weighed down by a drop in July exports and weakness in competing oils on the Dalian and Chicago exchanges.

“The benchmark palm oil contract FCPOc3 for October delivery on the Bursa Malaysia Derivatives Exchange slid 185 ringgit, or 4.23 per cent, to RM4,184 (US$990.53) a tonne in early trade to hit its lowest since July 23 after rising 2.3 per cent last week,” it said.

The webinar was in conjunction with BMD’s plan to launch the FEPO, a new palm oil futures contract, in the third quarter of this year.

Sabah and Sarawak contribute about 45 per cent of Malaysia’s crude palm oil production.

BMD commodity derivatives senior executive Nicholas Lau said as CPO market in Sabah and Sarawak had grown significantly over the years, it sought to launch FEPO as an entirely separate contract from the existing Crude Palm Oil Futures (FCPO).

“There is little trading of FCPO from most East Malaysia palm oil companies due to the absence of East Malaysia delivery ports in FCPO.

“FEPO will directly address these concerns and entice trading, allowing these palm oil companies to hedge their position in the physical CPO market. There has been a long standing desire for BMD to make available East Malaysia ports as approved delivery points for the FCPO,” said Lau.

Source : NST

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