KUALA LUMPUR: Crude palm oil (CPO) prices will remain buoyant when recovery in global economies remains elusive or whose sustainability is still in question, as price-conscious buyers will turn to the cheaper edible oil.

Rabobank International Food & Agribusiness Research and Advisory Southeast Asia deputy manager, Veiverne Yuen, said the price discount between CPO and other edible oils such as soybean oil, corn and rapeseed oil would drive near-term demand for CPO.

“Cost-conscious consumers and businesses would switch to palm oil in order to lower their costs.

“This switch to cheaper substitutes would drive up demand and prices for CPO, especially in countries that have a low per capita income and a larger lower-income population base such as China,” he told The Edge Financial Daily via email recently.

Yuen’s forecast on CPO’s prospects mirrored that of Indian conglomerate Godrej International’s director Dorab Mistry, who last week said demand from the world’s major buyers of edible oils — China and India — would jump in a period of low palm stockpiles and weak production.

Based on statistics compiled by independent cargo surveyor SGS (Malaysia) Bhd, palm exports to China grew 40% to 231,370 tonnes during the May 1-20 period. Exports to Pakistan also rose 16% to 56,550 tonnes from 48,700 tonnes.

Shipments to the European Union, US and India, however, fell. EU palm imports dipped 22% to 143,060 from 182,897 tonnes, US down 17% to 68,605 tonnes and India to 74,950 tonnes from 86,267 tonnes in the May 1-20 period.

In total, Malaysia’s palm exports were up 10.7% month-on-month to 827,609 tonnes, the cargo suryevor said.

In addition to the falling palm supplies, its rival soybean oil was going through spells of low stocks from the two key soy exporters, the US and Brazil. While the outlook remained bullish for soy, Mistry predicted CPO prices would exceed RM3,000 a tonne “very quickly”, as price-conscious markets like India would chase for palm oil.

Since the beginning of the year, CPO prices have risen more than 44% to the current RM2,500. CPO rose to a nine-month high of RM2,799 a tonne on May 13. Palm oil for the benchmark August contract closed RM103 lower to RM2,499 a tonne on Bursa Malaysia Derivatives last Thursday.

Rabobank’s Food & Agribusiness Research and Advisory Southeast Asia analyst Chan Wei Siang maintained near-term bullishness on CPO, with prices at around RM2,600 a tonne.

“However, the longer-term prospects for palm depend on outlook from the rest of the oilseeds,” he said, adding that there would be a clearer picture on supply and demand once the total planted area of soy and corn had been finalised.

CPO’s current price discount to other edible oils would remain attractive to the cooking oil blending segment, said Yuen.

“Barring any changes in import restrictions, CPO demand from the cooking oil blenders would remain strong as they seek to increase the proportion of CPO to lower costs,” he said.