KUALA LUMPUR: Dryness in certain areas in Malaysia and Indonesia this year will also likely impact crude palm oil (CPO) production in 2015, but bodes well for the commodity price, Maybank Kim Eng said.
It said 2015 CPO supply growth would be muted compared to the relatively good harvest this year and the research house has maintained a "neutral" view on the sector with an unchanged 2015-2016 CPO average selling price forecast of RM2,600 a tonne.
"The key upside risk to our view is weather anomalies, while the downside risk is a further decline in the crude oil price," it said in a research note today.
It said industry players are also in consensus over the CPO price outlook, citing concerns over the bumper US soybean harvest, ample supply of palm oil and low crude oil prices as key reasons.
Furthermore, it said Indonesia's third biodiesel tender in September, aimed at supplying the commodity to East Indonesia and priced at plus 3.47 per cent to cover transportation costs, would lend further support to demand.
Other factors it said are the slowing down of new planting in Indonesia in recent years as planters enter more difficult areas, increasingly stricter RSPO requirements and higher compensations required by local governments and the community.
It said some greenfield land in Indonesia is also deemed "grey areas" and "unplantable" due to overlapping mapping claims by the agricultural, forestry and mining ministries.-- Bernama
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