This article first appeared in The Edge Financial Daily on January 17, 2020

KUALA LUMPUR: The Malaysian Palm Oil Board (MPOB) has projected a better year for the industry with crude palm oil (CPO) prices averaging RM2,750 a tonne in 2020 against last year’s average of slightly more than RM2,000.

Higher prices would be driven by stronger demand driven by substantial increase in the biodiesel mandate (B20 in Malaysia and B30 in Indonesia), firmer soybean oil prices, and slower palm oil production growth, said director-general Dr Ahmad Parveez Ghulam Kadir.

“Starting the year with low opening palm oil stocks, firmer palm oil prices and strong palm oil demand, 2020 is predicted to be a better year for the industry,” he pronounced at the MPOB’s Economic Review and Outlook Seminar 2020 yesterday.

Ahmad Parveez said firmer CPO prices are expected to boost export revenue from palm oil products by 21% to RM78 billion in 2020 from RM64.45 billion last year, even though export volume is projected to ease by 2.5% to 18 million tonnes, from 18.47 million tonnes.

Also at the seminar, Primary Industries Minister Teresa Kok expressed confidence that palm oil prices would be firmer in 2020, supported by favourable conditions in the global oils and fats market. She pointed out monthly average CPO prices have recovered from a low of RM1,879 a tonne in July last year, to RM2,813 a tonne in December, and that the government aims to increase the use of palm oil for biodiesel to 1.3 million tonnes annually for the B20 programme in the transport sector and B7 programme in the industrial sector.

“The government is committed to increase the blend of biodiesel with diesel petroleum in the domestic market for a cleaner environment. In line with that, the government has allocated RM35 million to undertake the engineering design involving 35 depots to implement the B20 and B30 agenda,” she said.

She added RM27 million had been allocated under Budget 2020 to promote and enhance the image of palm oil globally, and that the Malaysian Palm Oil Council and her ministry are working hard to open up new markets and engaging with overseas stakeholders on the implementation of the B20 programme.

MPOB to study US-China trade deal impact on M’sian palm oil

The MPOB will study the impact of the US-China phase one trade deal signed yesterday, as it may affect Malaysia’s palm oil sales because of China’s commitment to increase imports of US soybeans.

MPOB deputy director-general of services Balu Nambiappan said Malaysia’s oil palm industry, which had benefitted in the earlier stages of the US-China trade tussle, will have to look for ways to move forward now with the phase one deal completed as China is a price-sensitive market.

“But it is very early, we will have to study the trade deal signed yesterday in-depth and see what are the things [that can be done],” Balu said.

This follows reports that US President Donald Trump on Wednesday signed an initial trade deal with senior Chinese leaders, with Beijing pledging to more than double purchases from American farmers in the first year.