KUALA LUMPUR, May 22 — BMI, a Fitch Solutions company, is maintaining its view that the average crude palm oil (CPO) third-month futures prices will trade at a mean value of RM3,800 per tonne through 2023.

"Our forecast for average palm oil prices in 2023 implies a 22.6 per cent discount to prices across 2022 but also a still-significant premium to pre-Covid-19 norms, with mean prices in 2019, for example, of RM2,248 per tonne,” it said in a commodity price forecast report.

BMI said on a year-to-date basis, prices have averaged RM3,872 per tonne through 2023, having fallen by almost one-fifth between the end of 2022 and the time of writing.

It said in the immediate term, the risks to its outlook are weighted toward the downside amid soft import demand from China and India as well as expectations that the global soybean harvest in 2023/2024 will touch record highs.

Since the end of 2022, the soy-to-palm oil price premium has fallen by almost two-fifth from US$462 per tonne to US$286 per tonne as of May 17, 2023.

"Through the remainder of 2023, we highlight the widely expected onset of El-Niño conditions during second half as posing an upside risk to our price forecast.

"Associated with below-average rainfall over much of South-east Asia, the last major El-Niño resulted in a six per cent year-on-year (y-o-y) fall in palm oil output from Indonesia and Malaysia in 2015/16,” it added.

For 2024, BMI expected the average CPO benchmark price to ease to RM3,400 per tonne.

It also retained with view that palm oil prices will soften between 2025 and 2027 from RM3,000 per tonne to RM2,200 per tonne.

"This view is underpinned by our belief that the global palm oil production surplus will widen during this period, from 0.7 million tonnes in 2023/2024 to 1.9 million tonnes by 2026/2027.

"While we forecast that the growth of global palm oil consumption will surpass that of global production over our forecast period as a whole, we draw attention to the fact that demand growth is front-loaded, a reflection in part of the post-Covid rebound, and that we expect global production growth to outpace global demand growth over the final three years of our forecast period,” it noted. — Bernama