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
