In a year end release to close 2020, Fitch Ratings said it expected crude palm oil (CPO) prices to decline in 2021 on higher supply and assumes they will average $560/ton over the year, despite some upside risk, such as a strong La Nina weather pattern.
“There are indications that supply and inventory are picking up in Indonesia, which is the world’s largest CPO producer, and high prices are affecting demand from key constituents, such as Indian imports and Indonesian biodiesel,” Fitch Ratings said in its release.
It said that the benchmark CPO spot prices for Malaysia, the world’s second largest palm oil producer, touched $900/ton in December 2020 for the first time since 2012 and averaged at around $810/ton in 4Q20 to date. This was significantly higher than the $660/ton average in 3Q20.
Prices in 2H20 were supported by weak output and low inventory in Malaysia, robust prices and outlook for soybean oil, a close substitute for palm oil, due to market expectations of dry weather affecting supply, and a recent hike in Indonesian palm oil export levies.