Rabobank lowers palm oil price forecast for Q2 2017 to MR2,750/mt


Rabobank has lowered its price forecast of palm oil for the second quarter of 2017 to an average of MR2,750/mt, or $621.40/mt, from the previous forecast of MR2,800/mt made in February, in view of the recovery in regional production, the bank said in its monthly market outlook note released Thursday.

The bank has also revised lower its forecast of palm oil prices in Q3 2017 to MR2,650/mt, from the previous forecast of MR2,700/mt.

The downward revision came, as palm oil production in both Indonesia and Malaysia is trending higher, said the note citing production figures.

While Malaysia's crude palm oil production in February had fallen 1.4% month on month to 1.26 million mt, the February figure was 20.7% higher than in February 2016, the note said, citing data from Malaysia Palm Oil Board, or MPOB.

The year-on-year rise was seen by the bank as a sign that production rebound from the El Nino effect has begun.

Indonesian palm oil production decreased to 2.86 million mt in January, said the note, citing data from the Indonesian Palm Oil Association, or GAPKI.

Rabobank predicted that as palm oil output recovers, a full recovery in production is expected only from the second half of 2017.

Meanwhile, exports from both Malaysia and Indonesia in February and January remained relatively low, based on official data released, the note said.

But palm oil exports from Malaysia and Indonesia are expected to rise prior to the month of Ramadan and Eid al-Fitr beginning late May, which would keep stocks in both countries low before production surges.

Palm inventories in both Indonesia and Malaysia are currently low, according to the bank. Stocks in Malaysia fell 5.3% month on month to 1.46 million mt at the end of February, while inventories in Indonesia fell to 2.86 million mt in end-January compared with 3.75 million mt in end-December.

Meanwhile, the discount of palm oil to soybean oil has narrowed during mid-March to $83/mt compared with $124/mt during late February, said the note. The narrower discount could move demand away from palm oil.

Further out, while there is a 50% chance of the El Nino returning in H2 2017, according to weather data, there is still uncertainty over its occurrence, the note added, so palm oil prices may not currently reflect any impact.


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