CPO prince to hover between RM4,000-RM4,200 this year, says MPOB

Crude palm oil (CPO) price is expected to hover between RM4,000 and RM4,200 per tonne this year as compared to RM5,087.50 per tonne in 2022 as issues such as labour availability and production by Indonesia would remain key factors that influence the price.

Malaysian Palm Oil Board (MPOB) director general Datuk Dr Ahmad Parveez Ghulam Kadir said shortage of labour in the industry was among the factors that dragged down the price of CPO last year.

“Although the labour situation is expected to improve this year, concerns on the availability are still there,” he said during his presentation on the performance and prospects of Malaysia’s palm oil industry at the Palm Oil Economic Review and Outlook Seminar 2023.

He noted the temporary suspension of foreign workers intake was lifted in early 2022 but the inflow of foreign workers into the country was slower than expected.

“In the first half of 2022, the labour crunch issue continued to take a toll on production.

“As the situation improved towards the second half of the year, CPO production has started to increase slightly,” he said.

He said the Malaysian Palm Oil Association (MPOA) estimated about RM20 billion of revenue losses in 2022 due to workers shortage.

CPO production in the country marginally rose to 18.45 million tonnes last year compared to 18.12 million tonnes in 2021.

The highest production was recorded in October at 1.81 million tonnes while the lowest was in February at 1.14 million tonnes.

He noted the higher CPO production was due to higher fresh fruit bunch (FFB) processed arising from higher FFB yield.

FFB yield last year stood at 15.49 tonnes per hectare, slightly higher than 15.47 tonnes recorded the previous year.

CPO prices posted a 15.4 per cent increase last year to RM5,087.50 per tonne from RM4,407 per tonne in 2021.

The highest price reached was in May 2022 at RM6,873 per tonne while the lowest level hit was RM3,682 per tonne in October.

On Indonesia’s policy, he said the neighbouring country has tightened its export policy for palm oil to keep more domestic supply and less for exports.

This was to ensure ample palm oil for festive seasons as production is expected to be seasonally weaker in the first quarter of this year.

“Effective February 1, 2023, Indonesia will impose a higher biodiesel blending mandate, B35 from B30, and hence will increase domestic consumption of palm oil.

“These latest policy changes would further restrict global palm oil supply.

“Hence, demand for Malaysian palm oil is expected to rise which will eventually assist  in reducing higher domestic palm oil stocks,” he said.

Palm oil export is expected to increase 3.7 per cent to16.30 million tonnes this year from 15.72 million tonnes last year, attributed to expected on-going palm oil demand from importing countries, said Ahmad Parveez.

He said production is estimated to rise by three per cent to 19 million tonnes in 2023 from 18.45 million tonnes in 2022 following expected increase in mature planted area especially in Peninsular Malaysia and Sarawak.

This would be supported by the anticipated better weather conditions as well as the labour situation which is poised to stabilise as the application for foreign workers has been approved in stages.

He added concerns over soybean supply risks due to dry weather patterns in Argentina and southern Brazil which is severely impacting crops is another factor that will influence the prices of the Malaysia CPO.

“Even though there are several signals that dry weather in South America is improving, it may be too late in the season at this point to salvage some crops,” he said.

Malaysia’s palm oil stock is foreseen to slip 8.7 per cent to two million tonnes in 2023 from 2.19 million tonnes last year due to the expected increase in export demand, especially from major importing  countries.

Tags: Crude palm oil, Production, Malaysia, CPO, price, Indonesia, MPOB