Rabobank cuts Q4 palm oil price forecast on higher production, lower soy prices

28.07.2016

Global finance institution Rabobank late Tuesday cut its forecast for palm oil prices on the Bursa Malaysia to MR2,300/mt, or $565.51/mt, for the fourth quarter, down MR100/mt from the Q4 forecast in its June monthly report, due to falling soy oil prices and a rise in CPO production.

With the US expecting bumper corn and soybean harvests this year and fears of an La Nina weather event receding, Rabobank forecast prices of soybeans to average $10.30/bushel in Q3 and $9.90/bushel in Q4.

US plantings of soybean hit a record 83.688 million acres in June, surging from 1.452 million acres in March, and expectations of a large US corn crop are piling pressure on soy bean prices, Rabobank said in the report.

US soymeal and soyoil stocks are also high, and seen as adequate to meet global demand, exerting further pressure on palm oil prices. Malaysia's production of palm oil totaled 1.53 million mt in June, 12% higher than market expectations of 1.49 million mt, while Indonesia's June production was seen to rise 12% month on month to 2.5 million mt, Rabobank said in the report.

Malaysia's production was forecast to increase a further 3% month on month to 1.57 million mt in July.

However, demand for palm oil increased in July, with shipping data indicating that Malaysia's exports to China and India rose 85% and 21% respectively in the month, according to the report.

Over July 1-25, Malaysia exported 1.013 million mt of palm oil, up from 881,000 mt in the same period of June.

China's demand for palm oil is expected to increase further, as its palm stock levels fell to 300,000 mt in July from 500,000 in June, and Chinese import demand is likely to provide some support to CPO prices on the Bursa Malaysia, according to the report.

Malaysia's palm oil inventories rose 7.6% month on month to 1.78 million mt in June, according to Malaysian Palm Oil Board data, but were still down 17% year on year.

Indonesia's palm stocks fell about 3% month on month to 1.9 million mt in June, and were down 32% year on year, according to survey data in Rabobank's report.

However, Rabobank said it was too early to say if a downtrend in inventories would continue.


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