CPO PRICES TO BE SUPPORTED AT US$998 PER TONNE, SAYS MIDF RESEARCH

KUALA LUMPUR, July 11 (Bernama) -- Crude palm oil (CPO) prices is most likely to be supported at RM3,000 (US$998) per tonne as exports to the Middle East continue its uptrend in view of inventory build-up in the coming fasting months, says MIDF Amanah Investment Bank Bhd.

Lower CPO prices would definitely create buying interest and higher
crude oil price would increase the biodiesel application in European Union countries, hence increasing demand for soybean oil, it said in a research note Monday.

MIDF maintained its average CPO price forecast at RM3,400 per tonne for this year with a positive view on the plantation sector amid planters enjoying good profit margins. (US$1=RM3.00)

"As long as CPO prices are trading above RM3,000 per tonne level, planters will enjoy over 50 per cent operating profit margin as the current production cost is ranging between RM1,100 per tonne and RM1,500 per tonne," it said.

MIDF expects June's CPO production to be four per cent higher than the 1.74 million tonnes recorded in May, mainly due to favourable weather conditions.

The Malaysian Palm Oil Board is expected to release its June output data today and expects exports in June to increase to 1.49 million tonnes, an increase of six per cent, month-on-month, and three per cent, year-on-year.

The higher projected exports was due to better offtake to China, India and Pakistan, it added.

However, MIDF said inventory was expected to remain high as export growth was keeping pace with CPO production growth.

This will cause the inventory level to remain at its current high level of between 1.9 million tonnes and 2.1 million tonnes.

MIDF said the expected high inventory level would result in panic selling activities and some downward pressure on the prices in the short-term.

"However, we view the current declining trend in the CPO price as a buying opportunity and will also spur demand in the future," it added.

Currently, CPO prices were trading at a discount of RM563 per tonne to soybean and this could potentially result in price-sensitive countries shifting away from soy oil to palm oil.
-- BERNAMA