Palm oil prices are expected to remain high for the next year as production will remain restricted due to rising fertilizer costs and long-term labor shortages, the Council of Palm Oil Producing Countries (CPOPC) announced today.
The sector, which is already facing lower yields after farmers reduced fertilizer use in 2018 and 2019, could again suffer from high input costs next year.
CPOPC said smallholder farmers are expected to reduce their inputs as nitrogen and phosphate prices have increased 50% to 80% since mid-2021, while plantation companies may face further challenges due to supply shortages.
"As a result, Indonesia and Malaysia may not be able to achieve output growth in 2022," it said. The two countries together account for 85% of the world's palm oil supply.
The tight supply has already pushed benchmark crude palm oil futures prices up 31% so far this year, with the contract hitting a record high of 5,220 ringgit ($ 1,252.25) per ton.
"Palm oil production will remain constrained with limited upside potential and prices will likely continue to trade in the bullish $ 1,000 per tonne range," CPOPC said, adding that higher soybean oil production could dampen the 2022 rally.
The council predicts that China's palm oil imports will increase to 7.2 million tons in 2021/22, from 6.8 million tons in 2020/21, supported by an economic recovery.
India's palm oil imports are estimated at 8.6 million tonnes in 2021/22, compared to 8.5 million tonnes in 2020/21, while European Union imports of 6.2 million tonnes in 2020/21 6.9 million tons will increase.
However, CPOPC warned that the effects of the Omicron coronavirus variant cast doubt on the recovery in demand.
Source
Hansa Terminhandel GmbH