Weak soybean oil price drags CPO prices

KUALA LUMPUR: The palm oil price discount to soybean is likely to narrow further but weaker soybean oil prices may drag down crude palm oil prices in the first quarter next year, says HwangDBS Vickers Research.

In a research note today, it said palm olein price discount to soybean oil had narrowed significantly year-to-date, due to unexpectedly low fresh fruit bunches (FFB) yields in Indonesia and better-than-expected US soybean yield.

“It is likely to narrow further as the anticipated jump in South American soybean harvest and seasonally lower palm oil demand in first quarter next year may cap further gains in palm oil and plantation counters alike,” it said.

Malaysia’s Nov 13 palm oil stockpile of 1.978m MT (+seven per cent month-on-month) was higher than expected, on slowing exports.

However, HwangDBS said Dec 13 stockpiles are projected to decline further on low crop season and lower exports.

“Taking into account higher deliveries for Chinese New Year requirements, Dec 13 palm oil exports are expected to rebound by four per cent month-on-month (m-o-m) to 1.583m MT, however, output should continue to drop by seven per cent m-o-m to 1.725m MT, in line with seasonally lower FFB yields,” it added.

The research house expects near-term correction in palm oil prices and recommends investors to take advantage of near-term positive sentiments to lock in profit, following the bull run over the past three months.

Meanwhile, Hong Leong Investment Bank (HLIB) Research said higher palm usage from biodiesel may not necessarily boost CPO prices significantly vis-a-vis crude palm oil prices (assuming current price levels stay) in order to sustain the economic viability of biodiesel.

“For now, we are keeping to our 2014 average price projection of RM2,600/tonne,” it added. -- Bernama

Read more: Weak soybean oil price drags CPO prices [You must be registered and logged in to see this link.]