It has been a topsy-turvy 2020 for palm oil stocks. What started out as a relatively promising year for crude palm oil (CPO) prices in December 2019 and January on the back of weaker 4Q2019 output and commencement of Indonesia’s B30 biodiesel mandate — a blend of 30% palm oil in regular diesel fuel — quickly turned into a nightmare following the Covid-19 pandemic. CGS-CIMB Research head Ivy Ng noted that palm oil prices fell from over RM,3000/tonne ($984.02/tonne) to below RM2,000/tonne in March, which triggered a correction of palm oil stocks — including those listed in Singapore. 

However, as China and India began to normalise their economies, imports began creeping back upwards, spurring a recovery in CPO prices, which is seen to continue to the lag effect of 2019’s El Nino, says DBS Vickers Securities analyst William Simadiputra. Dry weather from June 2019 to September 2019 affected production 12 months ahead in 2020, which caught out buyers hoping to buy at low prices in 2H2020 on the expectation of higher production. With low buyer stockpiles and low seller supplies, CPO futures reached an eight-year high of RM3,420/tonne on Nov 19, with the Jakarta-based analyst expecting higher prices to remain the case for some time. 

But CPO prices going into the new year could decline due to a low-to-moderate intensity La Nina effect increasing rainfall in the last three months of the year. Given the Meteorological, Climatological and Geophysical Agency of Indonesia expects 55% of Indonesia to experience higher rainfall than average, Fitch Solutions sees higher palm oil fruit yields and CPO output in 2021, resulting in lower prices. They expect CPO prices to fall from an average of US$600/tonne ($806.14/tonne) in 2020 to US$560/tonne come 2021. 

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