KUALA LUMPUR, April 26 — There will be more factors supporting local crude palm oil (CPO) prices following China’s agreement to buy more Malaysian palm oil, says Rakuten Trade Sdn Bhd.
China has agreed to buy at least an additional 1.9 million tonnes of CPO with an estimated value of RM4.56 billion over the next five years.
“This is in addition to the four purchase contracts signed on March 1, totalling 1.62 million tonnes of palm oil worth US$891 million (RM3.64 billion),” Rakuten said in a research note today.
The proposed direct purchase of palm oil and palm-based products were among the main contents of a memorandum of understanding (MoU) inked between Malaysia and China in Beijing yesterday.
Under the MoU, both countries also agreed to a RM2 billion investment in a biojet fuel plant, as well as RM200 million to produce unsaturated fats, depending on market feasibility.
Echoing Rakuten’s view, Interband Group of Companies senior trader Jim Teh said the MoU was good news for the palm oil industry as it would help to clear the available inventory.
“This is a good sign for our smallholders,” Teh told Bernama.
Last year, Malaysia exported 3.07 million tonnes of palm oil and palm-based products valued at RM8.4 billion to China compared with 2.87 million tonnes worth RM9.42 billion in 2017.
Additionally, Teh suggested the government should set up cooperatives to help independent smallholders obtain additional profit from the sale of oil palm fruits.
“Smallholders are suffering because their dealers are squeezing them in terms of cost and profit, so this cooperative will help them (the smallholders) deal directly with buyers,” he said.
Rakuten said in addition to the palm oil sales, Prime Minister Tun Dr Mahathir Mohamad’s current visit to China has also resulted in other positive results, the most notable being the revival of Bandar Malaysia project.
“Expect a stronger ringgit as we foresee more foreign capital inflow in due course,” it added. — Bernama
