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 said in a note issued on Tuesday. Yields of fresh fruit bunches per unit of mature plantation area fell by an average of 10% in the first half of 2020, said the rating agency, based on data from seven companies. However, yields are gradually picking up due to better rainfall since late last year, it said. According to the rating agency, a majority of the companies analysed had higher yields in the second quarter year-on-year and month-on-month, and the improvement is likely to strengthen in the second half. “CPO prices may continue to be strong, contrary to our expectations, if the La Nina weather pattern exacerbates dry conditions in the Americas, affecting soybean yields,” it said. According to the rating agency, another factor is the labour crunch in Malaysia, which relies on foreign workers for the majority of its plantation workforce.
Published in The Express Tribune, September 16th, 2020.
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