KUALA LUMPUR, Dec. 14 (Xinhua) -- Analysts said on Wednesday that crude palm oil (CPO) prices are expected to stay firm till the first quarter of 2023 due to supply concern.
Maybank Investment Bank Research said in a note that it expects CPO price to be well supported at current levels till early 2023 as the current heavy rainfall forecast is expected to last till January 2023 amid seasonally low production cycle.
Meanwhile, in the absence of a credible official source in Indonesia, it gathered from a few corporate captains that Indonesia's palm oil stockpile has eased sharply from its recent peak.
Maybank noted that CPO prices continue to trade at attractive discounts of more than 400 U.S. dollars per ton to U.S. soyoil, Argentine soyoil and German rapeseed oil, making it extremely competitive.
According to the research house, supply concerns will continue to hog the limelight in the near term as Malaysia's meteorology department reiterated its forecast of heavy monsoon rainfall anticipated to hit the east coast of Malaysia, and the northern Borneo states of Sabah and Sarawak between December 2022 and January 2023.
"Heavy rainfall and flood may disrupt field operations and crop evacuation, lowering crop potential," it said.
Across the globe, it said that La Nina's development is also closely monitored until harvesting period at the end of the first quarter of 2023 in South America.
It also noted that Argentina, the third largest producer of soybean after Brazil and the United States, is presently suffering from a drought considered to be the worst in 50 years.
CGS CIMB, on the other hand, predicted that palm oil prices will stay firm at 3,800 ringgit (861 U.S. dollars) to 5,000 ringgit (1,133 U.S. dollars) per ton at the start of the first quarter of 2023 due to several factors.
First, there are concerns over supply risks as the ongoing drought in Argentina, considered the worst in 50 years, could lead to severe soybean crop losses.
Besides, the third consecutive year of La Nina is causing heavier-than-usual rainfall in key palm oil regions.
In addition, biodiesel demand is rising as Indonesia plans to raise its biodiesel mandate to B35, and the United States is seeing increasing renewable diesel capacities.
Meanwhile, first quarter is the lowest production season for palm oil and CGS CIMB expects the shortage of foreign workers to be resolved only in the second half of 2023.
However, the research house believes that CPO prices could soften from the second quarter of 2023 onwards as CPO supply recovers with the entry of more foreign workers while slower global growth could curb demand.
"We project average CPO prices of 5,122 ringgit (1,160 U.S. dollars) /3,800 ringgit (861 U.S. dollars) per ton for 2022/2023," it said.
Hong Leong Investment Bank Research also believes that CPO price will sustain at above 4,000 ringgit (906 U.S. dollars) per ton over the next few months, possibly until the first quarter of 2023.
However, it opined that CPO prices will start trending down from the second quarter of 2023 onwards, on the back of better supply visibility for vegetable oils, arising from easing labor shortage in Malaysia and absence of weather anomalies, heightened risk of global recession, and inventories built up in key palm oil importing countries.
The research house maintains 2022 to 2024 CPO price assumptions of 5,050 ringgit (1,144 U.S. dollars)/4,000 ringgit (906 U.S. dollars)/3,800 ringgit (861 U.S. dollars) per ton. ■