Fitch Solutions cuts palm oil forecast to RM2,300 in 2019

Fitch Solutions cuts palm oil forecast to RM2,300 in 2019
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KUALA LUMPUR (Dec 13): Palm oil average price forecast for next year cut from RM2,400 /ton as prices will end 2018 lower than expected, Fitch Solutions Macro Research says in Dec 12 report.

* Global palm consumption seen growing 5% y/y in 2019, fastest rate since 2013, as Indonesia increasingly supports biodiesel use and Malaysia looks to revive biodiesel sector

* India will remain “bright spot” for import demand

** Imports will be stronger after change in tax regime dented shipments in 2018; however, depreciation in rupee will limit buying

** EU demand to stagnate in coming quarters amid weaker economic growth, rising negative sentiment toward palm oil

* Global palm output forecast at +3.9% in 2018-19 started Oct vs +6.2% year earlier; production slowing due to area and yield constraints

* Malaysian output growth seen at +2.5% in 2018-19 vs +4% previous year

** Production weak in recent months as govt cracks down on illegal immigration, leading to labor shortages, harvest delays, crop loss

** Authorities unlikely to relax these efforts

* Indonesian output growth seen stronger at +4.6% y/y

* Renewed risks of re-emergence of El Nino pose upside risk

* While palm may get temporary boost from weather-related disruptions, or cyclical tightening in soybean markets, ample supplies under normal weather conditions will keep prices subdued in next 5 years

* Futures in Kuala Lumpur trade at RM2,057 on Thursday