Palm prices to hold above MR3,200/mt on higher exports, flooding in Malaysia, Indonesia

Malaysian crude palm oil exports are expected to rise in January, keeping CPO front-month futures firmly above MR3,200/mt or $722.51/mt, according to a weekly sector note released by OCBC Bank Singapore on Friday. 
The note quoted data from cargo surveyor Societe Generale de Surveillance, which showed that CPO exports could rise 4.3% month on month to 1.16 million mt in January. 
OCBC also expects flooding in Malaysia and Indonesia to keep prices above the MR3,200/mt level in January. 
Palm operations in the Malaysian states of Johor and Pahang have been affected by the flooding, although, conditions are said to be improving currently, the bank added. 
CPO exports from Malaysia and Indonesia had remained lethargic during November and December, despite the approaching Lunar New Year holidays, as buyers kept hoping for lower CPO prices, a market source said. 
CPO prices have, however, kept firmly above the MR3,000/mt mark since late November and have risen steadily during December. 
In view of firm CPO prices, Chinese buyers made some last minute purchases just before the Lunar New Year, added the market source, and that was a big reason for higher exports in January. 
Meanwhile, the Indonesian Palm Oil Association, or GAPKI, said the El Nino drought which afflicted the region in 2016, had a rather minimal impact on CPO production in Indonesia. 
CPO production fell only 3% to 34.5 million mt in 2016, from 35.5 million mt in 2015. 
CPO inventories had fallen to a worrying 1 million mt at the end of 2016 from 4.5 million mt in 2015. 
This plunge in palm oil inventories in Indonesia can be attributed to the country's B20 biodiesel blending mandate, which converts CPO into PME to be used for fuel consumption, the note said. 

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