Crude Palm Oil (CPO)Futures has crossed the RM4000 level again this week and is poised for more gains in the weeks to come. Given that we are in the high production cycle of cpo production and price is still strong in a seasonally weak period tells us something big is brewing in the market.

Potential factors that may be in play

1) The emergence of El Nino

1) With the onset of the El Nino weather phenomenon hitting it's peak between Decembe2023 and February 2024 year the price, the CPO price may see a further rally in prices on expectation of a strong El Nino. The last time we had a super El Nino was in 1998 where we saw CPO prices rally from RM800 in March to RM2400 by October1998.(Coupled with the fact that we also saw the Ringgit devaluation that year)

2) Soybean Oil price

Soybean price has been on a very strong bull move which has been the main beneficiary of Joe Biden's policies favoring the  Renewable Energy sector. The big discount between CPO and soybean oil at around USD450 will also move more demand to CPO, with the long term discount at around USD100.

3) Crude oil price trading above USD80

With crude oil price trading over USD85 making the biodiesel angle viable. Indonesia's continue push towards using CPO in its biodiesel push will augur well for CPO demand in the foreseeable future.

Conclusion

The easiest way to catch on to this bull trend is to go long the CPO futures contract on Bursa Malaysia Derivatives. However some may prefer the option of buying good and well managed plantation companies.