We raise our CPO price forecasts to RM2,700/t for 2020 and RM2,750/t for 2021.

We expect planters to clock in 8-47% profit growth in 2021 on back of higher CPO price and improving yields. Our profit estimates are currently 8% above street, implying market is likely pricing in 2021 CPO price average of RM2,560/t.

Risk-reward skewed to the upside. 

Despite growing production, we expect CPO prices to remain relatively supported and average higher YoY as seen in the past during La Niña years. Soybean’s production prospects have been clouded by the current La Niña event, which bodes well for palm oil. Furthermore, global vegetable oil supply (excluding palm and soybean oil) is forecast to decline by 1.3 mn t next year. Oil World has forecast edible oils’ stock/usage to remain tight at 13.8% (vs ten-year average of 14.4%).