Crude Palm Oil prices in 2016 are likely to average higher than in 2015 as global demand holds up and output falls in Indonesia and Malaysia as a result of especially dry El Nino-related weather conditions, according to Fitch. “We expect the pre-export tax and levy CPO price to range between $650/tonne and $700/tonne this year,” Fitch says.
Production has fallen significantly in Malaysia, with output declining to an 18-month low of 1.04 million tonnes in February 2016. This dragged stocks down from a peak of 53 days in November 2015 to as low as 27 days in March. Industry association estimates in Indonesia also forecast a reduction in output there in 2016 - the first annual fall in production in at least 15 years.
In Indonesia, domestic consumption is likely to increase substantially, which should also bolster global prices because less CPO is available for export. The Indonesian government has raised palm oil content in biodiesel to 20% in 2016, after increasing the blending rate to 15% in 2015 from 10%.
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