Olam International remains optimistic that Malaysian and Indonesian crude palm oil (CPO) production will pick up this year, leaving the company bearish about CPO prices over the coming months.
CEO Sunny Verghese expects palm oil production to pick up through 2017 following a slower than expected start to the year. Verghese expects Malaysian CPO production to climb 2.7mn t in 2017 compared to 2015 levels to around 20mn t, the higher end of analysts’ estimates. Verghese expects to see a 3.7mn t increase in output from Indonesia in 2017 meanwhile compared to last year, bringing total Indonesian CPO production to 33.8mn t, slightly lower than other analysts’ projections of a 4.1-4.2mn t recovery. Overall, Olam expects Indonesian and Malaysian palm oil production this year to hit roughly 54.8mn t. High output should depress CPO prices this year to between MYR2,200-2,700/t (509-625USD/t), Olam says.
The lack of a strong La Nina effect this year following 2015’s El Nino is one factor mitigating against a stronger upswing in palm oil output, Olam says. The firm says there is a chance another El Nino may hit later this year, which would crimp palm producers’ potential in 2018.
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