Anglo-Eastern Plantations sound a downbeat note on prospects for palm oil prices, even as futures in the vegetable oil extended a surge to their highest since August, buoyed by worries over Ukraine exports of rival sunflower oil.

The plantations group, which holds 90,000 hectares of land, in the main in Indonesia, said that crude palm oil (CPO) prices “are expected to be weak for the remaining part” of 2022.

The downbeat forecast reflected in part a seasonal factor, with the group noting that South East Asia, responsible for nearly 90% of global palm oil output, is amid its “high production season”.

Volumes typically peak around October in Indonesia and Malaysia, the big two producers.

‘Could push prices even lower’

Anglo-Eastern Plantations noted too a decision by the Indonesian government to extend an export levy waiver, “in its effort to flush out and reduce its stockpile of palm oil” – a decision which “could push prices even lower”.

The government on Monday extended the waiver until the end of 2022, unless a reference price used in deciding tax levels exceeds $800 per tonne. Officials have set the reference price for November 1-15 at $770.88 per tonne.

The government introduced the waiver in July, after a short-lived palm oil export ban, aimed to limiting domestic cooking oil prices, sent inventories soaring.

Anglo-Eastern Plantations reported that some of its mills had been forced “to reduce external [oil palm fruit] crop purchases as their storage tanks for CPO reached maximum capacity as inventories built up during the export ban”.

Palm up

The downbeat price forecast came even as Kuala Lumpur palm oil futures for January gained 3.9% to 4,398 ringgit a tonne, the highest finish since August for a benchmark contract.

The gain, which took to 10.3% the surge in the contract this week, was attributed to further buying on concerns over prospects for exports of rival vegetable oil sunflower oil from Ukraine, the top exporter, after Russia pulled out of a safe shipment deal.

However, Russia later on Wednesday said that it would resume its participation in the deal, after its withdrawal failed to halt grain shipments.

Price vs volume

Anglo-Eastern said that it gained an average of $896 per tonne for its crude palm oil in the January-to-September period, up by 23% year on year.

“The group also benefited from higher palm kernel prices, which were 35% higher at the average price of $635 per tonne against $469 per tonne last year.”

Palm oil production for the nine months fell by 3.5% to 351,460 tonnes, reflecting a knock-on effect from replanting, which means fewer mature trees, as well as the dip in purchases of palm oil fruit from external growers.

Anglo-Eastern Plantations shares stood 1.0% higher at 788p in late deals in London.