FITCH Solutions Country Risk & Industry Research has revised its 2021 palm oil price forecast to a significantly upward trend of RM3,400 per tonne from RM3,050 per tonne on the back of tight markets while prices of alternative oil seeds remain elevated.
The forecast is based on an average of about RM3,270 per tonne over the rest of the year compared with spot prices of RM4,012 per tonne, according to the research house.
“Supply has been coming in below expectations in Malaysia in 1Q 2021 due to labour shortages aggravated by COVID-19 which are keeping stocks at multi-year lows. Meanwhile, palm oil import demand is recovering in many different markets as economies reopen.” said Fitch Solutions.
The Research house said that it remains bearish on prices from current levels on a six month-horizon and continues to see prices averaging lower in 2022 although it has also revised its forecast higher to RM2,900 per tonne from RM2,600 per tonne previously.
On India’s demand, the research house noted that its import demand could also taper off in the near term given the ongoing large wave of COVID-19 infections and the very elevated vegetable oil prices in the country, both of which will weigh heavily on domestic demand .
On its long-term outlook, the research house said that it foresees prices remaining below 2021 levels out to 2025 (which is still higher than 2015-2019 averages).
“Although palm oil production will slow down significantly in the coming years, we expect demand growth to underwhelm in China, India and the EU (European Union),” said the research house.
It also said that there are uncertainties surrounding the steady increase in biodiesel blending in Indonesia adding that the country has carried on relatively successfully with its ambitious biodiesel programme.
