MIDF Research has stayed “positive” on the sector, anticipating that the crude palm oil (CPO) price would remain elevated in the second half (H2) of 2022.
“From a technical point of view, it does seem that the CPO price rally is waning on correction mode given the weak numbers seen to date of RM4,766 per tonne, but we believe there are signs that this soft pace (will be) short-lived,” it said in a note today.
It forecast CPO prices to rest above the RM5,000 level in H2 2022 amid tight supply of edible oils due to subdued soybean production, supply concerns as the Russia-Ukraine war prolongs (disrupted sunflower supply) and lower-than-expected Malaysian palm oil production.
MIDF Research has maintained its 2022 CPO price forecast of RM5,500 per metric tonne.
“Despite our positive view on the sector, we do expect the CPO price will ease in H2 2022 but at a gradual pace on concern of inflationary pressure globally after achieving higher-than-expected CPO price in the first half of the year,” it said.
Public Investment Bank Bhd (PIVB) is retaining its “neutral” stance on the plantation outlook with a full-year CPO price forecast of RM5,000 per tonne.
It said Malaysian palm oil exporters may be facing stiffer competition in the coming months as Indonesia has proposed to raise palm oil export quotas last Friday due to excessive palm oil inventories.
“Following this announcement, CPO futures tumbled 4.2% or RM207 to RM4,703 per tonne.
“This does not bode well for Malaysian upstream plantation players as margins are shrinking sharply amid the high production costs,” it said in a note.
The Indonesian government has now allowed palm oil producers to export seven times the amount of their domestic sales from the current level of five times, due to the oversupply of palm oil in the domestic market.
In Malaysia, it was reported that some palm oil mills have temporarily halted production following the plunge in CPO prices as they stand to lose at least RM150,000 for every 100 tonnes of CPO produced based on current prices.
The stoppage may range from one day to one week, which could potentially affect the oil extraction rate, said PIVB.