RAM Ratings sees CPO trading lower in 4Q

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KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) has revised downward its crude palm oil (CPO) price forecast for the fourth quarter of this year (4Q14) to between RM2,100 and RM2,300 per tonne, from the RM2,300 to RM2,500 levels, as it expects production will continue to suppress CPO prices.

Following the revision, the rating agency has revised its 2014 CPO price forecast to between RM2,400 and RM2,500 per tonne from between RM2,500 and RM2,600 per tonne.

“The country’s CPO production has exceeded the Malaysia Palm Oil Board’s forecast for the nine months of this year (9M14) by 3.16%,” it said in a statement yesterday.

“As 4Q14 is still a seasonally high production period, we do not expect the stockpile to ease substantially,” it said, adding that the CPO prices are unlikely to see any significant upside.

RAM Ratings noted that the CPO price averaged US$772 (RM2,210) per tonne in 3Q14, which was 3.9% below its lower-end forecast.

“In August 2014, the daily CPO price plunged to a five-year trough, coming in below RM2,000 per tonne.

“The drastic, unexpected drop mirrored price action with respect to competing oil seeds such as soybean, which had seen a bumper harvest,” it said.

On the country’s palm oil stock, RAM Ratings noted that it had risen to above 2 million tonnes since August 2014 as the industry moved into its peak production cycle, which was unaffected by earlier anticipated El Nino weather conditions.

On the recent announcement by the government to increase the biodiesel content from 5% to 7%, the rating agency said it could result in an additional 200,000 tonnes of CPO consumption a year.


This article first appeared in The Edge Financial Daily, on November 26, 2014