RHB raises 2018 average price forecast for palm oil to 2,550 rgt/ton

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KUALA LUMPUR (Dec 13): Downside risks for crude palm oil aren’t significant as higher production has been factored in, Hoe Lee Leng, head of regional plantations at RHB Research Malaysia writes in Dec 13 note.

* 2018 est. lifted to 2,550 ringgit/ton from 2,400 ringgit 

** Prices seen range bound between 2,300-2,700 ringgit/ton

** "While we continue to expect CPO output to grow, particularly in certain parts of Malaysia, where recovery has been slower, we believe much of this has been priced in already to CPO prices:" Hoe

* 2019 est. raised to 2,700 ringgit from 2,500 ringgit

* Output growth in Malaysia, Indonesia to decelerate in 2018 from est. 12% y/y increase in Malaysia, +21% y/y in Indonesia

** Delayed production peak season in Malaysia this year means peak season is likely to overflow into 1Q 2018, resulting in output growth of 5%-7% in 2018

** Indonesia’s production may have peaked in Oct-Nov, growth seen at 3%-5% in 2018

* Mild La Nina would still have a muted impact on vegetable oil supply, as it could affect sentiment and support prices in 2018

** Price impact may be +8-12% based on historical events

* Further strengthening in ringgit past RHB’s projection of 4rgt/$ in 2018 is a risk that may lower CPO prices