KUALA LUMPUR, Sept 11 — CGS-CIMB Research has raised its 2020 crude palm oil (CPO) price forecast to RM2,500 from RM2,300 per tonne on the back of better-than-expected price.

A recent rally saw spot prices climbed to as high as RM2,936 per tonne on September 3 from its year-to-date low of RM2,021 per tonne on May 12.

In a note today, the research firm said this was due to concerns over tight global inventories as Indonesia’s second quarter supply was below expectation.

However, in a note today, it said the rising price has further worsened the economic viability of biodiesel which may affect the fulfillment of B30 biodiesel programme in Indonesia next year.

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CGS-CIMB Research has also increased this year palm oil supply forecasts for Malaysia by two per cent to 19.48 million tonnes from 19.1 million tonnes in tandem with the growing production.

The production grew three per cent month-on-month (mom) due to seasonal trends and two per cent year-on-year (yoy) to 1.86 million tonnes last month.

However, it fell five per cent yoy to 12.7 million tonnes in the first eight months (8M) 2020 on weak first quarter production.

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“We deem this to be above our full-year forecast of 19.1 million tonnes as 8M2020 accounted for 67 per cent of our full year 2020 forecast versus historical average of 63 per cent,” CGS-CIMB Research said.

The research firm also expects palm oil stocks to grow two per cent mom to 1.73 million tonnes at end of this month and output to grow two per cent mom, while exports to rise one per cent mom.

“We expect demand for palm oil for food consumption to improve ahead of the celebration of the mid-autumn festival on October 1 (in China) and recovery in demand from the hotel, restaurant and cafe sector,” it said. — Bernama