Rabobank revises crude palm oil futures forecast down on increased production, biodiesel regulations


The average palm oil price forecast on the Bursa Malaysia for second-quarter 2017 was revised marginally downwards to Malaysian ringgit 2,500/mt, or $574.85/mt, in Rabobank's latest monthly commodities forecast released late Wednesday.

Rabobank maintained its bearish view on palm oil prices in its latest note, as palm oil production in Indonesia and Malaysia recovers from last year's drought.

Rabobank stressed that palm oil prices last month had traded lower than their own forecast for last month.

One factor causing the lower-than-predicted prices was a more-robust-than-expected recovery in Malaysian production as well as higher inventories in Malaysia in March.

Palm prices were also pressured due to the US Department of Agriculture's reports, which showed increased soybean plantings in the US and an upward revision in the South American soybean harvest, adds the note.

The note also stressed upon the increase of CPO production in Malaysia, which grew 16% month on month to 1.46 million mt in March, according to Malaysian Palm Oil Board statistics.

Meanwhile, Indonesian palm oil production decreased 8% month on month to 2.63 million mt in February, according to Indonesian Palm Oil Association data, said the note. Although monthly production was lower, it still registered a 6% increase year on year.

Finally, the note said that biodiesel regulations in both the US and EU could increase negative price sentiment on palm oil, since both the regions are keen to restrict the usage of palm oil for generation of biodiesel.

The European parliament has recently voted on a draft resolution to restrict the use of palm oil in biodiesel and also to make the criteria for sustainability certification of palm oil stricter, it added.

EU palm oil imports, from both Malaysia and Indonesia, exceed 7 million mt per year, half of which go into biodiesel.

Meanwhile, the US has begun anti-dumping and countervailing duty investigations into Argentinian and Indonesian biodiesel, with a preliminary result expected in early-May 2017.

The bulk of Indonesian exports is directed to the US, says the note, and the imposition of such duties would hit Indonesian palm oil demand squarely, it adds.


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