Jump in palm oil stocks set to keep lid on prices

[KUALA LUMPUR] The steady drop in the price of crude palm oil (CPO) this year is already eroding the incomes of households relying on the crop. And there is no telling when prices will start to rise again to a level which producers are comfortable with, generally considered to be around the RM2,800 (S$1,118) per tonne level.

The CPO price has fallen nearly 42 per cent from its peak of RM4,330 per tonne set on March 3, 2008.

The three-month forward benchmark price is likely to fall further following the release of data from the Malaysian Palm Oil Board (MPOB) on Wednesday, which showed palm oil stocks jumping 16.29 per cent year-on-year to an all-time high of 2.48 million tonnes, considerably higher than expected.

There are reasons to be concerned as slowing global economic growth, coupled with a drop in demand and improving yields, puts further pressure on prices by increasing inventory levels. This is in spite of analysts believing prices will rebound towards year-end on demand pick-up and lower production.

Source: http://www.businesstimes.com.sg/premium/malaysia/jump-palm-oil-stocks-set-keep-lid-prices-20121015

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