Published on 05 February 2015
RAM Ratings expects CPO prices to average
between RM2,200/MT and RM2,400/MT in 2015, against a backdrop of ample
edible oil supply and subdued consumption growth. The weak ringgit is
expected to provide a cushion against an otherwise sharper fall from
2014’s average price of RM2,408/MT.
As a growing mature hectarage in key palm
oil-producing countries underpins CPO production growth in 2015, strong
soybean production in the US and expectations of a bumper harvest in
South America are anticipated to keep the edible oil market well
supplied. The heightened competition between edible oils could keep CPO
prices in check while demand growth is expected to be lackluster.
Meanwhile, weak crude oil prices reduce the economic viability of CPO
use in biodiesel, notwithstanding demand from government-driven
mandates.
While we note of the increased attractiveness of CPO
due to the weaker ringgit, the build-up of inventory in the medium term
would be bearish on the commodity’s prices. CPO prices may be supported
by the lower production in the first half of the year and potentially
weakening in the second half when production seasonally peaks.
Please click here to download RAM’s quarterly CPO price outlook.
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