AVERAGE prices for crude palm oil are expected to be RM2,750 per tonne in 2020, better than last year, according to a government agency that oversees the commodity.

In comparison, crude palm oil had averaged between RM2,000 and RM2,300 per tonne in 2019 due to higher stocks.

The Malaysian Palm Oil Board (MPOB) said the firmer prices in 2020 are due to several factors, such as slower palm oil production, which will lead to a decrease in world supplies.

Another factor helping prices will be the increased usage of biodiesel in vehicles and industries in Malaysia and Indonesia – the world’s top two producers of the commodity.

Indonesia will start a B30 biodiesel mandate this year, while Malaysia has started using B20 biodiesel in Langkawi, Kedah.  

“The implementation of B30 and B20 mandates will consume a lot of the world stock in crude palm oil,” said MPOB director-general Ahmad Parveez Ghulam Kadir.

Parveez said the two policies are estimated to consume about eight million tonnes per year in Indonesia and 750,000 tonnes in Malaysia.

“Overall, the supply and demand of edible oils this year will remain tight and consumption will overtake supply in the medium- and long-term.

“There will be a shortfall in supply for oil palm and this will keep prices firm,” Parveez said on the sidelines of a palm oil 2020 outlook seminar in Kuala Lumpur today.

MPOB added that export revenue from palm oil products are expected to increase by 21% to RM78 billion in 2020 from RM64.45 billion in 2019.

The commodity contributes about 4.5% to Malaysia’s gross domestic product.

It is a source of income for about two million people in Malaysia, including 650,000 small holders and their families.

Another factor that will affect demand and prices for CPO is the current US-China trade war which has made it more expensive for China to buy US soybean oil, Parveez said.

But a potential trade deal could see soy oil dropping in price and competing with palm oil. – January 16, 2020.