CGS-CIMB expects CPO to trade between RM2,400 to RM2,800 per tonne in Sept 2020

KUALA LUMPUR, Sept 4 — CGS-CIMB expects crude palm oil (CPO) prices to trade in the range of RM2,400 to RM2,800 per tonne in September 2020 on concerns over tighter-than-expected supply.

The research firm said the average CPO price grew 12 per cent month-on-month (mom) and 36 per cent year-on-year (yoy) to RM2,815 per tonne in August on concerns over the relatively low inventory level of palm oil in Malaysia and Indonesia.

It said the output during the expected peak production period of August-December 2020 could be disappointing due to labour issues in Malaysia and weather issues in Indonesia.

“Assuming our view of higher palm oil supply in the fourth quarter materialises, we believe further upside to CPO prices could be capped as concerns over current tight inventory will ease and B30 mandate may be difficult to fulfil beyond 2020 due to lack of funding,” it said in a note today. 

The research firm said Malaysia’s CPO output probably grew 6 per cent mom (+6.0 per cent yoy) to 1.92 million tonnes in August 2020.

It said palm oil exports likely fell 14 per cent mom and 12 per cent yoy, based on average export statistics by cargo surveyors Intertek Testing Services (ITS) and Amspec Malaysia, as the recent sharp rise in CPO prices may have impacted demand.

“We estimate that Malaysia’s palm oil inventory grew 6 per cent mom but fell 20 per cent yoy to 1.8 million tonnes as at end-August,” it said. 

Over the past 10 years, Malaysian palm oil inventory had risen by an average of 5.3 per cent mom in the month of August.

Official figures will be released on September 10, 2020, it said.

“Our projection of a 6 per cent mom rise in CPO output in August is broadly in line with historical trends of a 6 per cent mom increase in August output over the past 10 years.

“Our survey revealed that Sabah and Sarawak’s estates were the main drivers behind the improving fresh fruit bunches yields.

“This is not unexpected as Peninsular Malaysian estates posted sharper-than-expected recovery in yields in the May-July period compared to that of East Malaysian estates,” it said.

CGS-CIMB said the higher production in August may have alleviated some concerns over the worker shortage issue in Malaysian estates.

However, planters have recently shared their concerns that the situation may become more acute over time as existing foreign workers, who choose to return to their home countries will not be able to return to work in Malaysia due to travel restrictions, and there is currently a freeze on new foreign worker permits. — Bernama