We attended the three-day Palm and Lauric Oils Conference 2022 (POC 2022), organized by Bursa Malaysia. Physical turnout halved to 600 pax this year due to the closure of international borders and tight Covid-19 measures in the respective regional countries. Generally, the consensus thinks the CPO price, which has recently surpassed a supernormal high of more than RM8,000/mt, has hit its peak and is projected to see correction in the near term. At the point of writing, CPO futures rallied 10% to RM7,060/mt as Indonesia further restricts the palm oil exports to 70% from 80% to cool down domestic cooking oil prices. We maintain Overweight on the plantation sector with a full-year CPO price forecast of RM4,300/mt. Our top picks are Sarawak Plantation and Ta Ann.
- Consensus forecasts average at around RM5,500/mt. Generally, most industry experts have an upbeat view on 2022 price outlook despite expecting price normalization in the 2H. Interestingly, the two notable palm oil experts have contrasting view on the CPO price outlook. Dr. James Fry anticipates palm oil prices could hit a record RM8,100/mt in coming months following a plunge in global edible oil stocks and decline in export surpluses due to the impact of war in Ukraine. On the other hand, Dorab Mistry forecasts that CPO price may slump in the second half of the year as a surge in inflation following Russia’s invasion of Ukraine hammers global demand. Togar Sitanggang has most bullish call as he sees CPO price could potentially touch as high as RM9,330/mt in the next 6 months while Mr.Pankaj Kumar’s long-term view of RM3,000-3,500/mt is the lowest.
- Major wildcards to CPO price forecasts include: i) prolonged Russia-Ukraine war that affects sunflower and corn production and Black Sea port operations, ii) deeper soybean production cuts from South America, iii) prolonged labour issue in Malaysia, iv) changes of domestic market obligation ruling and v) a boost of oilseed plantings by farmer given the current strong agricultural prices.
Source: PublicInvest Research - 10 Mar 2022