December 30, 2022
CPO expected to average at RM5,100 a tonne in 2022, seen at RM3,800 a tonne in 2023, says MPOB
KUALA LUMPUR (Dec 30): The Malaysian Palm Oil Board (MPOB) expects the price of crude palm oil (CPO) to average at RM5,100 a tonne in 2022, which is 15.7% higher compared to RM4,407 a tonne in 2021.
The government agency also foresees the price of CPO to stabilise at an average of RM3,800 a tonne in 2023 in anticipation of
- higher palm oil production,
- improved weather conditions in the second half of 2023 and
- higher availability of supply of other major vegetable oils.
MPOB director general Datuk Dr Ahmad Parveez Ghulam Kadir said soybean oil prices, which are expected to be low due to the higher production in Brazil and the US, may impact the price of CPO.
He said in a statement on Friday (Dec 30) that the strengthening of the ringgit against the US dollar may also affect the price of CPO.
According to MPOB, the average CPO price for January to November 2022 was RM5,167 a tonne, up 18.4% compared to RM4,363 a tonne for the same period in 2021.
It said CPO prices had experienced a decline beginning the third quarter of 2022 due to the
- high CPO production season,
- rising palm oil stocks and
- declining soybean oil prices.
Palm oil industry saw higher production, exports and revenue in 2022
MPOB expected the closing stocks of palm oil in 2022 to be at 1.85 million tonnes, up 14.9% compared to 1.61 million tonnes in December 2021 due to higher production.
Parveez said closing stocks of palm oil are projected at two million tonnes in 2023, higher than that in 2022, due to the expected higher supplies of other major vegetable oils including palm oil.
According to MPOB, CPO production for January to November 2022 stood at 16.83 million tonnes, an increase of 1% compared to 16.67 million tonnes achieved in the same period of 2021.
“This was attributed to an increase of 2.8% in processed fresh fruit bunches (FFBs) to 86.51 million tonnes in January to November 2022 compared to 84.17 million tonnes in the same period last year,” MPOB said.
Parveez said that CPO production is expected to increase slightly by 2.1% to 18.5 million tonnes in 2022 as compared to 18.12 million tonnes in 2021. He said the slow recovery is expected due to the issue of labour shortage in oil palm plantations' FFB harvesting and unloading activities.
Parveez projected CPO production to further increase to 19 million tonnes for 2023 due to the expected increase in the productive areas, especially in Peninsular Malaysia and Sarawak. He added that the workforce situation may stabilise next year as foreign worker applications are being approved in stages.
MPOB also provided data that the exports of palm oil and other palm-based products for January to November 2022 increased by 1.3% to 22.43 million tonnes compared to 22.14 million tonnes in the same period of 2021.
It said the higher price of palm oil in January to November 2022 has boosted total export revenue by 31.8% to RM120.43 billion from RM91.38 billion in January to November 2021.
Exports of palm oil alone itself rose slightly by 0.8% to 14.25 million tonnes in January to November 2022 compared to 14.14 million tonnes in the previous corresponding period, MPOB said.
“As such, palm oil export revenue surged 31% to RM80.22 billion from RM61.26 billion in the same period of 2021,” MPOB said.
Parveez said that Malaysia’s ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on Sept 30, 2022 will encourage demand for palm oil products as it broadens the country’s access to new markets such as Canada, Mexico and Peru, which are not covered by any existing free trade agreement.
“Based on cost benefit analysis on the potential impacts of the CPTPP, upon ratification and implementation of the CPTPP, tariffs for palm oil products are now reduced from a maximum of 6% for Canada, 5% for Mexico and 9% for Peru to lower tariffs based on the tariff elimination schedule,” he said.
“Apart from higher palm oil exports to the markets, the elimination of tariffs improves the Malaysian palm oil competitiveness in the CPTPP member countries.”
https://www.theedgemarkets.com/node/650017
Hailey Chung
theedgemarkets.com
Surin Murugiah
Conclusion:
Profits of plantation companies are affected by crude palm oil (commodity) prices which are heavily influenced by many external factors:
- seasonal fluctuation on palm oil production,
- weather conditions
- availability of supply of other major vegetable oils e.g. soya
- labour supply in oil palm plantations' FFB harvesting and unloading activities.
- strength of the ringgit
- increase in the oil palm productive areas
- tariffs for palm oil products
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