Demand Still Vigorous, CPO Price Keeps Rising

JAKARTA – The price of crude palm oil (CPO) was growing robustly early this week. But its potential to decline will be growing after the fasting month of Ramadhan. Based on data from the  Malaysia Palm Oil Futures on Wednesday, 21 April 2021, the price of CPO for July 2021 delivery increased by up to 128 points to 3,805 ringgit per ton.

Previously, the contract price reached 3,951 ringgit per ton. The price of CPO for June 2021 delivery rose by 137 points to 3,987 ringgit per ton after reaching the highest level at 4,145 ringgit per ton.

Founder of Wahyu Laksono said that fundamentally the palm oil market is still positive. One of the factors that support the high prices is the continually strong demand from a number of countries.

He noted that during March 2021, the total CPO import of India reached 526,463 tons, which increased by 33.5 percent if compared to that of February 2021 and in line with the prediction of business players and analysts.

Meanwhile, AmSpec Agri Malaysia reported that the CPO export of Malaysia for the period of 01 – 20 April 2021 rose by 10.2 percent if compared to the same period last month.

“So far, the CPO price movements are still good enough. The rising prices of soybean oil and grains have also brought a positive impact to the palm oil,” he said.

Such positive sentiment is also supported by the momentum of current fasting month of Ramadan and the incoming celebration of Idul Fitri in a number of Asian countries, including Indonesia and Malaysia. Wahyu said that the limitation of supply from the producing countries can maintain the price of CPO at the highest level.

But he warned that the CPO price is also haunted by a number of negative sentiments at the international market. The market fear of rising inflation as a result of the strengthening of US dollars is potential to pressure the palm oil price.

He said that after Ramadan and Idul Fitri celebration, the potential of CPO price to decrease will be increasing. At that time, the cycle of La Nina will end, which will then allow growers to implement easier process of planting and harvesting oil palm plantations. Better condition of weather will also bring positive impact to the substitution products of CPO, which include soybean.

The combination of output increase of soybean grain from producing countries, such as the USA and Brazil, and the weakening demand will trigger price decline for both soybean and CPO. Wahyu predicted that during the second quarter of 2021, the price of CPO is predicted to reach between 3,500 and 4,100 ringgit per ton. “Currently, the CPO market is seeing a tug of war between the sentiments. So, when it rises to 3,600 it will be still a target of correction,” he said.

Meanwhile, the Indonesian Palm Oil Association (Gapki) Executive Director Mukti Sardjono said that the high price of CPO was caused by the low production of vegetable oils and the increase of biodiesel production due to the commitments of several governments, including Indonesia, the USA, Brazil and Germany, to continue their programs of using biodiesel.

He said the Oil World had predicted that the global production of biodiesel in 2021 will reach 47.5 million tons or 2.2 million tons higher than that in 2020 and 1.5 million tons higher than that in 2019.

According to him, due to the high price many importing countries had decided to hold their purchases, causing the drop of exports. Indonesia’s exports of palm oil in February 2021 was predicted to reach around 1,994,000 tons, which was 30 percent or 867,000 tons lower than that in the previous month.

“Its palm oil export value was predicted at around US$2.0 million, which was lower by US$600 million or 23 percent from that of previous month,” he said in a press release.

The palm oil production in February 2021 also saw a drop of around 10 percent from that in January due to seasonal factor, while compared to the same period in 2020, the production in February 2021 was lower by 6 percent. (*)