Jakarta, CNBC Indonesia – The price of crude palm oil (Crude Palm Oil/ CPO) turned stronger throughout this week. The increase is quite significant, which is around 7%.
This week, the price of CPO on the Malaysian stock exchange rose 7.5 percent point-to-point, until the price strengthens at MYR 2.911 / ton.
After experiencing a weakening trend for 3 consecutive weeks, it seems that investors are starting to reinvest CPO. Last week, CPO weakened 4.04% point-to-point.
The cause of the decline in CPO prices for 3 consecutive weeks is the La Nina phenomenon that has occurred and is predicted to continue in Southeast Asia in the next few months, thus becoming a threat. CPO supply, although it has entered the peak period of seasonal production from September to November.
La Nina is an event that the sea water temperature in the Pacific Ocean falls below the average surrounding temperature. This is because sea surface temperatures in the western and eastern Pacific are higher than usual.
This incident causes the air pressure at the western Pacific equator to decrease. This encourages excessive cloud formation and causes high rainfall in the affected areas, especially countries in the Southeast Asian region.
In addition, the lack of labor in the oil palm plantation sector makes Malaysia have to face harvesting obstacles, especially since Malaysia is the second largest CPO producer after Indonesia.
“Malaysian production is weakening, but Indonesian production remains strong,” Paramalingam Supramaniam, the director of the Selangor-based brokerage Bestari Sdn Bhd, told Reuters.
However, this La Nina phenomenon will still be seen as a trigger for a rally in vegetable oil prices for the remainder of this year and early next year.
In the short term, the positive sentiment driving the market is the phenomenon of buying palm oil in large quantities to increase stocks in India ahead of the Diwali celebrations in November.
Policy stocking China, with its large volume of purchases of palm oil, is also a sentiment that boosts prices.
“If consumers continue to buy plus their managed funds also buy (contracts) occur simultaneously, it is possible that the price of palm oil could temporarily reach 3,200 ringgit,” Thomas Mielke, Director of Oil World, told Reuters.
CNBC INDONESIA RESEARCH TEAM
(chd / chd)