KUALA LUMPUR – TH Plantations Bhd (THP) expects palm oil prices to remain high in the first half of 2021 (1H2021) and moderate in 2H2021 as production increases, stock levels improve, and global prices of oilseeds abate.
In its 2020 annual report released today, the plantation arm of Lembaga Tabung Haji said it believes the factors that could affect pricing also include Covid-19, but this will be mitigated by vaccine roll-outs.
“The consequences of the pandemic in 2021 will continue to be short-term labour shortages arising as a result of international border closures.”
Also, the ongoing impact of the Indonesian B30 mandate will continue to support palm oil prices due to the huge quantity absorbed by the programme.
THP said China’s appetite for soy meal is expected to increase as the country continues to recover from the swine fever epidemic.
The sustained anti-palm oil sentiment in Europe and push to phase out palm oil-based biofuel use by 2030 will be a drag on prices, as major economies in the continent focus on maximising their own oilseed production.
While Malaysia’s palm oil production may not increase significantly this year, said THP, global production is expected to rebound, with Indonesian output likely to rise by up to 3.3 million tonnes.
“Despite the increases expected in the production of oils across the board, total demand is projected to grow by five million tonnes in 2021.”
It said palm oil prices will likely stabilise in July and hold steady for the rest of the year.
“The palm oil sector remains strong, but greater focus should be placed on the adoption of mechanisation and automation to improve productivity.
“All players in the industry need to embrace innovation to future-proof their businesses and avoid being affected by supply shocks in the future, such as by the labour shortages arising from Covid-19.”
Against this backdrop, it anticipates higher average crude palm oil prices for 2021, leading to better performance for the group.
Looking further ahead to the next five to 10 years, the company expects palm oil production growth to slow due to limited opportunities to expand planting areas over the past few years.
“This will provide long-term support for palm oil prices.” – Bernama, April 30, 2021
