Crude palm oil (CPO) prices could surge to RM3,000 per metric tonne (MT) should dry weather conditions in the United States continue throughout August.
KUCHING: Crude palm oil (CPO) prices could surge to RM3,000 per metric tonne (MT) should dry weather conditions in the United States continue throughout August.
This led MIDF Amanah Investment Bank Bhd (MIDF Research) to maintain its neutral view on the sector with average CPO price of RM2,750 per MT for 2017.
“We believe that there is little downside risk to our estimate as CPO price year to date is RM2,897 per MT and we expect CPO price to be well supported at above RM2,500 per MT throughout the second half of 2017,” it said in a report yesterday.
“We are monitoring the dry weather condition in the United States closely as it could cause significant rise in soybean oil price and hence CPO price as well.”
This comes as the US’ soybean production outlook has deteriorated, with soybean crop’s condition worsening throughout July due to lower than average rainfall and high temperature.
As of July 31, MIDF Research estimated about 41 per cent of US soybean field were rated either fair, poor or very poor. This is much worse than only 29 per cent registered during the same period last year.
“Only 10 per cent of United States soybean field were rated excellent,” it added. “We gather that the most affected areas are northern US, parts of the Midwest and Mississippi.”
Meanwhile, soybean oil price has appreciated in July, increasing 5.4 per cent to 35.13 US cents per pound or US$774 per MT.
“This is likely to be caused by raising concerns on the potential soybean crop loss caused by the detrimental weather conditions in the United States.
“We are positive on the increase in SBO as this should lead to higher demand for palm oil as both are commonly used as substitute in the food industry.”