Fitch Solutions revises up palm oil price forecast on tight supply

KUALA LUMPUR, Oct. 29 (Xinhua) -- Fitch Solutions Country Risk and Industry Research on Friday revised up palm oil prices forecast to average 4,200 ringgit (about 1,013 U.S. dollars) per ton in 2021, from a previous forecast of 3,800 ringgit per ton, due to tight supply.

The Fitch group unit said in a note that it is revising up again its palm oil price forecast significantly for a fourth consecutive quarter as the market remains very tight.

According to the research agency, palm oil prices have skyrocketed in recent months, breaching the all-time highs achieved in 2008.

"We have also revised up our 2022 forecast, but continue to expect prices to correct significantly next year, averaging 3,400 ringgit per ton, from a previous forecast at 3,200 ringgit per ton," it said.

Fitch Solutions said the market will remain very tight in the fourth quarter and into the first quarter of 2022, as it sees no immediate relief to severe labor shortages at Malaysia's plantations.

Supply-wise, it has revised down its 2020/2021 estimates for Malaysia's palm oil production, with output estimated to decline by a sharp 7.3 percent compared with a previous forecast of minus 6.2 percent, following a similar significant drop in the previous year.

"The demand picture is also bullish in the near term, due to a number of factors. Import demand has picked up in recent months and will remain strong despite the rally in palm oil prices," it said.