THE WHAT? Crude palm oil (CPO) prices are expected to rise thanks to a rise in demand from India and China coupled with a drop in supply thanks to labor shortages caused by the pandemic, according to a report published by The Star.
THE DETAILS Head of Research for CGS-CIMB, Ivy Ng told The Star that prices will hit a three-year high this year – the commodity is expected to hit RM2,500 per tonne by 2020’s close, its highest since 2017.
THE WHY? A combination of dry weather, leading to lower yield in both Indonesia and Malaysia, labor shortages caused by the GVC and a lift in demand from India and China is causing the price spike.
As Ng told The Star, “This year is one of the most volatile years for CPO prices. Earlier this year, CPO prices spiked to above RM3,000 per tonne due to a supply concern in Malaysia because of weak production in the last quarter of 2019 and first quarter of this year, as well as Indonesia’s latest biodiesel mandate.
“Then, the COVID-19 outbreak in March saw prices go below RM2,000 per tonne due to supply chain disruptions and MCOs in many countries globally.
“CPO recovered stronger than anticipated in May. On a nine-month average, CPO prices were averaging at RM2,546 per tonne, which is higher than the 10-year average of RM2,530.”