Crude palm oil (CPO) prices are likely to decline in the next few months as yields and output increase, due to gradual realisation from better weather conditions and seasonality, Fitch Ratings says.
Yields of fresh fruit bunches (FFB) per unit of mature plantation area fell by an average of 10% in 1H20, based on data from seven companies. However, yields are gradually picking up due to better rainfall since late last year. A majority of the companies analysed had higher yields in 2Q20 year-on-year and month-on-month, and the improvement is likely to strengthen in 2H20.
CPO prices may continue to be strong, contrary to our expectations, if the La Nina weather pattern exacerbates the dry conditions in the Americas, affecting soybean yields. Another factor is the labour crunch in Malaysia, which relies on workers from countries such as Indonesia and Bangladesh for the majority of its plantation workforce.