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CPO futures could rise further on Sabah lockdown and La Nina’s arrival

02 October 2020

Malaysian CPO futures rallying on production concerns

Malaysian crude palm oil (CPO) futures have risen above MYR2,800pmt in recent weeks, due to likelihood of a La Nina occurrence in 4Q. The weather phenomenon would bring about heavy rains and floods in SE Asia, impacting the harvesting of fresh fruit bunches in the oil palm estates. (The Star) Sabah has also ordered plantations, mills, and refineries in Lahad Datu, Tawau, Kunak, and Semporna, to shut for two weeks due to a sharp rise in the number of COVID-19 infections. (Straits Times) Sabah accounts for at around 25% of Malaysia’s palm oil production. An ongoing labor shortage caused by the pandemic has been putting a strain on Malaysian palm oil production. CPO prices are likely to continue rising on lower output and inventory, and this could weigh on SE Asian exports as well as the regional palm oil freights.


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