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CPO Prices Weakened in the First Half of 2023: What is the Future Outlook?

Adi Ahdiat 31/07/2023 17:30 WIB

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Average CPO prices on the Rotterdam commodities exchange tended to weaken in the first half of 2023. However, the World Bank projects that CPO prices will strengthen again next year.

Average Monthly CPO Price at the Rotterdam Commodity Exchange (January 2013-June 2023)*

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CPO Prices Weakened in the First Half of 2023: What is the Future Outlook?

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Average Monthly CPO Price at the Rotterdam Commodity Exchange (January 2013-June 2023)*

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Crude palm oil (CPO) prices fluctuated with a weakening tendency in the first half of 2023.

Compared to last year, the average CPO price in the first half of this year has fallen significantly.

According to Investing.com data, in the first half of 2022, the average CPO price on the Rotterdam commodity exchange reached USD 1,659.6 per ton.

In the first half of 2023, the average price fell to USD 950.8 per ton. Cumulatively, the average price weakened by 42.7% compared to the first half of last year.

According to the Food and Agriculture Organization (FAO), palm oil prices weakened due to low demand.

"International palm oil prices fell in June 2023, reflecting the prospect of high production from major producing countries, while global import demand remains weak," said the FAO in its early July 2023 Food Price Index report.

This weakening price is in line with the World Bank's projection. In its April 2023 Commodity Markets Outlook, the World Bank predicted that the average palm oil price throughout 2023 would reach USD 980 per ton, significantly lower than the 2022 average of USD 1,276 per ton.

However, the World Bank forecasts that palm oil prices will tend to rise again next year, averaging USD 1,020 per ton in 2024.

The World Bank stated that several factors could affect future palm oil prices, such as the El Niño weather phenomenon and European Union policies.

"In April 2023, there was a 62% chance of El Niño occurring in May-July, and more than an 80% chance of El Niño occurring in September-November. This increases the potential for changes in temperature and rainfall that could affect harvests worldwide," said the World Bank.

"Commodities sensitive to the effects of El Niño include coffee, rice, palm oil, and natural rubber. Long-term risks will continue to affect the production and prices of food commodities," it continued.

The World Bank also mentioned that the new anti-deforestation policy from the European Union is a long-term risk factor for the agricultural and plantation industry, including palm oil.

This policy prohibits EU countries from importing agricultural and plantation commodities that do not meet sustainability standards.

"The new (EU) law creates uncertainty for many food commodities, such as cocoa, coffee, palm oil, and soybeans," said the World Bank.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."