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Palm Oil Prices To Rise 17.9% In 2020 On Tight Supplies, Biodiesel Programmes: Reuters Poll

21 Jan 2020 3:23 pm
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MUMBAI - Average palm oil prices will surge 17.9% this year, as reduced output in the first half of the year and higher biodiesel consumption in top producers Indonesia and Malaysia tighten the market, a Reuters poll of industry participants showed.

Benchmark palm oil prices will average 2,650 ringgit ($650.80) a tonne in 2020, up from 2,248 ringgit last year, according to the median estimate from a poll of 18 analysts and industry players.

Indonesia's palm production is pegged to rise 0.55% to 45.75 million tonnes in 2020 from an estimated 45.5 million tonnes in 2019, according to the median estimate of 14 poll respondents who answered questions specifically on Indonesia's palm sector.

This is compared to output growth of 5.8% in 2019 over 2018's total of 43 million tonnes, sources said.

Output in No.2 producer Malaysia will grow by 0.35% to 19.93 million tonnes this year, based on the median estimate from 14 participants.

In 2019, Malaysia's production rose 1.85% to 19.86 million tonnes, up from 2018's 19.5 million tonnes.

The slower output growth is due to dry weather and lower fertiliser usage in both countries last year, when palm prices dropped as low as 1,960 ringgit.

Indonesia and Malaysia together account for nearly 90 percent of global palm production.

The market will be closely watching the roll-out of Indonesia's B30 biodiesel programme - biodiesel with 30% palm content - and Malaysia's newly implemented B20 programme, as together they are expected to increase local consumption by 10%-13%, traders said.

Indonesia is targeting 10 million kilolitres (8.7 million tonnes) of biodiesel production this year, while Malaysia's biodiesel association is expecting to produce 1.7 million to 2 million tonnes of the fuel.

Ongoing trade disputes between China and the United States, India and Malaysia, and the European Union and Indonesia will likely affect export shipments this year, poll respondents said.

Malaysia benefited from the trade war between the United States and China in 2019, with exports to China rising by 33.9% last year. However, a trade deal between the two largest economies may see China resume purchases of U.S. soybeans, which may result in a lower demand for palm oil.

India, the world's largest edible oil buyer, as well restricted overall imports of refined palm oil on Jan. 8., and informally instructed its traders to avoid purchases from Malaysia following a diplomatic squabble.

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