CPO Price Oct 4: Ringgit Strengthens, Palm Oil Weakens

The December 2016 CPO futures contract, the most active contract on Bursa Malaysia, weakened 1.75 percent or 46 points to RM2,590 (US$628.30) per ton at 10:40 WIB.

Meanwhile, the ringgit exchange rate was seen to strengthen 0.24 percent to 4.1243 at 10:54 WIB. However, the ringgit strengthening was held back by the surge in the US dollar.

At 10:46 WIB, the US dollar index strengthened 0.2 percent or 0.194 points to 95.889. This figure is the highest level since 20 September 2016.

Not long ago, Dorab Mistry, Executive with Godrej International Ltd., explained that the CPO price could decrease to RM2,200 per ton in November 2016. The main influencing factor is the recovery in production following the correction since the beginning of the year due to hot weather.

Palm oil, which is used for various needs ranging from food to cosmetics and fuel, re-entered a bullish period in August following a decline in supply in Indonesia and Malaysia. This is because the drought resulting from El Niño has affected the planting process.

Supply in Malaysia declined to its lowest level in the last five years last month, namely 1.46 million tons. According to data from the Malaysian Palm Oil Council (MPOC), in addition to production problems, the decline in supply is also triggered by an increase in exports.

Meanwhile, Mistry continued, supply in Indonesia plunged to 1.6 million tons in August. This figure is far below the highest point of 5 million tons in November 2015.

"However, production has now rebounded so that the price will be burdened. Even next year, the market should be prepared for a further increase in production," he said.

Nevertheless, the decline in CPO production throughout the current year has been far more severe than the estimates of some circles. This is seen as surprising enough for the market.