Palm prices seen lower in 2022 on output rise
Palm oil prices are set for another year of volatility and tight supply as Malaysia makes slow progress in tackling a labour crunch and government policies on green energy and food security spur demand, a Reuters poll showed.
Benchmark palm prices 1FCPOc3 will average 4,000 ringgit a tonne in 2022, down 3.4 per cent from last year's average of 4,142 ringgit, according to the median estimate of a poll of 18 analysts and those in the industry.
Prices, which already hit a record high of 5,380 ringgit a tonne this week, are expected to stay firm during the first half of the year.
"As we move into the low production period, supply is tight, reflecting sustained demand and the structural weakness in palm oil output," said Julian McGill, regional head at LMC International.
Top producers Indonesia and Malaysia are both expected to see production growth for the first time in three years in 2022, according to the poll. Indonesia's 2022 production is pegged at 48.5 million tonnes, up 3.4 per cent from an estimated 46.89 million last year.
Malaysia's production is forecast at 18.8 million tonnes, up 3.9 per cent from 18.1 million in 2021.
Respondents expect production to build in the second half of the year, especially in Malaysia, when an army of migrant workers is expected to alleviate a labour shortage.
However, La Nina weather conditions and reduced fertiliser applications over the past three years could cap supply gains.
New policies to curb fossil fuel consumption in countries such as Brazil, China and the United States, may lift palm oil demand for use in renewable diesel and biofuel production this year, sources said.
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