Lower crude palm oil price forecast

KUALA LUMPUR: Crude palm oil (CPO) looks set to trade between RM1,500 and RM2,100 per tonne in the second half of this year, according to top international palm oil players.

They made the forecast at the end of the 20th Palm and Lauric Oils Conference/Exhibition 2009 (POC 2009) here yesterday.

The more subdued price forecasts, made by London-based LMC International Ltd chairman Dr James Fry and Godrej International Ltd director Dorab E. Mistry, took into account shrinking demand this year due to the global economic crisis.

But OilWorld executive director Thomas Mielke was slightly more upbeat, making a forecast of between RM2,000 and RM2,060 per tonne.

Fry said the local CPO futures were set for a soft landing by the middle of this year.

“CPO prices can fall back to RM1,500 per tonne following slower demand and lower crude oil prices,” he said. “I’m more bearish in view of the gravity of the deep recession, and I fear crude oil prices will fall further and if so, CPO will also follow suit.”

Mistry agreed that CPO prices could come under pressure by the second half of the year due to a strong pick-up in both palm oil and soybean oil production as well as weaker demand.

“The CPO price range from now to October will see a downward trend from RM2,000 to RM1,500 per tonne,” he reckoned.

But Mistry said he expected CPO futures on Bursa Derivatives Exchange to cross RM2,000 and “might briefly challenge at best RM2,100 per tonne” over the next few weeks.

Palm oil stocks in the next few months would tighten and “this will likely help palm oil prices,” he said.

Malaysian Palm Oil Board on Wednesday released its latest figures for February which indicated a further drop in palm oil stocks to 1.56 million tonnes from 1.83 million tonnes in January.

At POC 2008, industry players had made bullish projections of RM2,800 to RM4,500 per tonne for 2009.

Mistry, who had forecast that CPO could hit as high as RM4,500 per tonne by February this year during POC 2008, admitted he was too optimistic last year.

On a more positive note, Fry noted that “the prices of fertilisers have also gone down. This spells good news for oil palm planters as the fertiliser cost represents about 60% of their production cost.”

He expects the more efficient planters to still make a profit even if CPO prices drop to RM1,400-RM1,500 per tonne due to the lower fertiliser prices.

Mielke of OilWorld said via teleconferencing from Germany that globally, there could be increasing demand for palm oil, especially for food, this year.

He estimated that palm oil would account for about 56% of exports among 17 types of the world’s vegetable oils and fats from September 2008 to October 2009.

Mielke is optimistic that demand for global vegetable oils both for food and non-food items will exceed production this year.

Something2Share:

What goes up will come down and what comes down will go up. This is a repeated cycle but what matters most is the Time Factor: When? Hong soon? For how long?

It appears that the bullish projections of CPO prices in POC2008 have become bearish projections in POC2009 because of global economic crisis, as if there will not be bright price outlook this year.

We have to wait and see, and hope for the best for global economic recovery.

Thousands Of Plantation Vacancies, No Takers

Despite more than 3,000 vacancies in the plantation sector, there are no takers, Malaysian Agricultural Plantation Association (MAPA) executive director Mohamad Audong disclosed today.

He said MAPA had made provisions to give priority to retrenched local workers to fill the vacancies, but so far, there were no applicants.

Mohamad said Malaysians should change their mindset as working in plantations was a very lucrative alternative as the perks and salaries were also attractive.

The lowest category of worker, that is, general worker, was paid a clean monthly wage of RM600.

For skilled and semi-skilled workers, the pay would vary from RM2,000 to RM3,000 a month.

Besides this, the workers are provided with free housing, transportation, electricity and water.

They are also entitled to medical benefits, Socso coverage and Employees Provident Fund contributions.

Mohamad said that the 400 MAPA member estates were employing a total of 125,000 workers and almost half of them were foreigners.

“However, in line with government policy, we are reducing our dependence on foreigners,” he explained.

He hoped retrenched Malaysians would consider working in the plantations and help realise the government’s policy.

On the ongoing negotiations with the National Union of Plantation Workers (NUPW), he said MAPA was reviewing its collective agreement with the union for the benefit of members who were oil palm harvesters and mill workers.

The NUPW, the country’s oldest union, represents 40,000 local and foreign workers in the plantation sector.

Something2Share:

This is not surprising. For the past 30 years, plantations have been mainly dependent on foreign workers, majority of them are Indonesian workers, beside Thai and Bangladashi workers. The Malaysians especially the younger generation are not interested to work in plantations located far from towns.

Yes. Plantations provide free housing, electricity and water but there have been cases only the older men are working in the estates, whereas thier wives and children are working in factories in nearby towns.

How to change the mindset of the retrenched Malaysian workers remains a BIG question for Plantation companies, MAPA and NUPW to crack their heads.