Malaysian palm oil prices will plunge to 2,500 ringgit ($547.29) by the end of December, weighed down by improving production, demand destruction and a slowdown in major economies, leading analyst Dorab Mistry said on Friday.
Malaysia’s benchmark crude palm oil prices FCPOc3 will decline to 3,000 ringgit ($656.74) a tonne by end-Sept and continue tumbling to its lowest since mid-July 2020 by year-end, Mistry, director of Indian consumer goods company Godrej International, said.
The contract rallied to a record high in March, surpassing 7,000 ringgit ($1,532.23), after Russia’s invasion of Ukraine triggered a global edible oil shortage, but prices have corrected by nearly 50% since.
High prices had caused demand destruction and the low production seen earlier in the year is now recovering strongly, Mistry told the Globoil conference in Agra, India.
Mistry pegged Malaysia’s production in 2022 to rise to 18.2-18.5 million tonnes, compared with 18.1 million tonnes last year. Output in the largest producer Indonesia is seen rising by 3 million tonnes.
Looking ahead, Mistry expects interest rates and recession to be the key price drivers.
“Once markets realise that inflation has been conquered, we are likely to see a recovery in equity markets – possibly in the last two months of the year,” Mistry said.
But a recovery in commodity prices will take time depending on the U.S dollar, he added.
For the /23 season, Mistry has a bearish outlook and sees a possibility of a recovery after December 2022 in equities.
He also said Indonesia should scrap all export taxes on palm oil exports until December 2022 to bring down stocks, which are weighing on the prices.
