Storm Brewing In The Edible Oil Market Likely To See Bullish Streak In CPO Prices

A perfect storm that is hitting the edible oils market is likely to bolster demand for CPO which is expected to see its prices ranging from RM4,000 and RM9,427 per tonne in 2022F, CGS CIMB said in a note.

It said that it deduces the mean to be around RM5,836 per tonne. This is 32% higher than the 2021 average CPO price of RM4,407 per tonne. However, this is 22% lower than the spot CPO price of RM7,511 per tonne as of 10 March 2022.

The S=stockbroking house said that the key bullish factors that led to the CPO rating to be at RM7,511/tonne are the unexpected disruptions to sunflower oil exports from the Black Sea region due to Russia’s invasion of Ukraine (this region accounts for 60% of the world’s sunflower oil output), drought in South America which resulted in cuts to soybean supplies for the current season (South America accounts for 51% of the world’s soybean output),  labour shortage in Malaysia (Malaysia accounts for 31% of global palm oil exports), and domestic Market Obligation (DMO) rule in Indonesia which requires exporters in Indonesia to sell 30% of their planned exports in the local cooking oil market effective 10 March 2022 (Indonesia accounts for 56% of the world’s palm oil exports).

For the rest of 2022, CGS CIMB said that the price-making factors for CPO are the duration of the Russia-Ukraine conflict, Indonesia’s DMO policy, labour shortage in Malaysian estates, weather development  In North America and Canada, farmers planting decisions, crude oil price, global liquidity and growth and changes in government policies on import duties and export taxes as well as biodiesel mandates that could impact the demand for edible oils,

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