Benchmark CPO price to weaken further in Q4 due to El Nino concerns: Fitch

Malaysian benchmark crude palm oil (CPO) price is expected to be weaker in the fourth quarter (Q4) 2023 due to concerns of a major impact of El Nino.

Malaysia CPO price spot prices have declined to below US$800 per tonne again in September after gaining strength in July on market concerns of a major impact of El Nino weather conditions on global vegetable oil supply.

Fitch Ratings expects prices to weaken to around US$750 per tonne in Q4 2023, averaging around US$830 per tonne for the year.

Palm oil output has risen significantly this year, and the firm expects it to improve further in the next nine to 12 months, before a potentially strong El Nino starts to affect output.

“The global supply of other vegetable oils should also rise during this period.

“We think this may cause CPO prices to drop below US$650 per tonne in the first half of 2024 (1H24). The price is averaging around US$830 per tonne for the year,” Fitch said today.

Palm oil production in Indonesia and Malaysia jumped by 11 per cent in the first half 2023 (1H23).

The trend of higher output will likely continue at least until 1H24.

“Indonesia has led in terms of production growth, and we expect yields in Malaysia to follow suit.

“The number of foreign workers in Malaysia has grown steadily since Q4 2022, and companies are imparting harvesting skills to new recruits to improve their productivity,” Fitch said.

Tags: vegetable oils, Indonesia, Crude palm oil, Production, Malaysia, output, Эль-Ниньо, CPO, benchmark price