KUALA LUMPUR: JP Morgan Asia Pacific Equity Research has raised its crude palm oil (CPO) forecast from RM2,450 per tonne for 2010-11E to RM2,600 (US$820) for 2010E and to RM2,800 (US$930) for 2011E.
It said year-to-date (YTD) CPO price of RM2,540 had surpassed its forecast.
'Our US soft commodities team has turned more positive on outlook for soybean oil (key substitute) well into 2011 driven by bio-diesel mandates. Weather risk from La Nina may likely continue to limit the 3Q seasonal weakness in prices,' it said in a research note issued on Sept 1.
JP Morgan Research said on the downside, it saw good support in CPO prices at RM2,450 from non-mandated bio-diesel demand, which is the break-even level at its 2011E in-house crude oil forecast of US$80 per barrel.
'Palm oil prices are likely to be strongest in 4Q10/1Q11, as these bullish factors would also coincide with the low palm oil output and monsoon season during this period,' it said.
The research house said overall, the above further reinforced a supportive demand-supply balance for vegetable oils which includes palm oil.
'On our estimates, the global stock-usage ratio for palm oil is forecast to fall to 13.3% in 2011E from 14.2% in 2010E,' it said.
JP Morgan said it had earlier felt that CPO prices would range between RM2,200-RM2,800 but now shifted this higher to RM2,400-RM3,000.
While the Indonesian and Singapore purer plays had outperformed recently, it continues to see prices supported by earnings revisions and expect trading opportunities to present itself within this framework.
Key risks to its more positive view on the palm oil price outlook hinged on:
Sharp decline in crude oil prices.'' Europe debt crisis, and/or overall slower than expected global economic recovery could put the new bio-diesel mandates in the US at risk.
Implementation of the mandates however is strictly regulated by The Environmental Protection Agency (EPA). Total delay or abolition of the mandates is unlikely though temporary waiver/relaxation is possible, but only with the approval of the US Congress.
Severe La Nina. A prolonged La Nina (wet weather), if materialises could translate to a lag impact of increased yields of CPO volumes.
'At the earliest we believe that this could occur is by mid-2011 (past La Nina experience in 1998-2001 translated to a 12-24 month time lag before crop volumes rose),' it said.
However, the research house said its positive soybean oil outlook by 2011 should help support CPO prices, while in the near term, production and harvesting set-backs from La Nina could translate to supply shortfalls and higher CPO prices.
It said year-to-date (YTD) CPO price of RM2,540 had surpassed its forecast.
'Our US soft commodities team has turned more positive on outlook for soybean oil (key substitute) well into 2011 driven by bio-diesel mandates. Weather risk from La Nina may likely continue to limit the 3Q seasonal weakness in prices,' it said in a research note issued on Sept 1.
JP Morgan Research said on the downside, it saw good support in CPO prices at RM2,450 from non-mandated bio-diesel demand, which is the break-even level at its 2011E in-house crude oil forecast of US$80 per barrel.
'Palm oil prices are likely to be strongest in 4Q10/1Q11, as these bullish factors would also coincide with the low palm oil output and monsoon season during this period,' it said.
The research house said overall, the above further reinforced a supportive demand-supply balance for vegetable oils which includes palm oil.
'On our estimates, the global stock-usage ratio for palm oil is forecast to fall to 13.3% in 2011E from 14.2% in 2010E,' it said.
JP Morgan said it had earlier felt that CPO prices would range between RM2,200-RM2,800 but now shifted this higher to RM2,400-RM3,000.
While the Indonesian and Singapore purer plays had outperformed recently, it continues to see prices supported by earnings revisions and expect trading opportunities to present itself within this framework.
Key risks to its more positive view on the palm oil price outlook hinged on:
Sharp decline in crude oil prices.'' Europe debt crisis, and/or overall slower than expected global economic recovery could put the new bio-diesel mandates in the US at risk.
Implementation of the mandates however is strictly regulated by The Environmental Protection Agency (EPA). Total delay or abolition of the mandates is unlikely though temporary waiver/relaxation is possible, but only with the approval of the US Congress.
Severe La Nina. A prolonged La Nina (wet weather), if materialises could translate to a lag impact of increased yields of CPO volumes.
'At the earliest we believe that this could occur is by mid-2011 (past La Nina experience in 1998-2001 translated to a 12-24 month time lag before crop volumes rose),' it said.
However, the research house said its positive soybean oil outlook by 2011 should help support CPO prices, while in the near term, production and harvesting set-backs from La Nina could translate to supply shortfalls and higher CPO prices.
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