AmInvestment Bank said in a note that it believes that higher supplies of palm and soybean would exert downward pressure on CPO prices.
The research house believes that palm inventory will continue rising as the industry enters the peak production period in the second half.
"We think that palm stockpiles may exceed 2 million tons in the second half. Barring an El Nino, CPO production is expected to be healthy in the second half as labor shortage has eased," it said.
Its average CPO price assumptions are 3,000 ringgit (643 U.S. dollars) per ton for large planters and 3,500 ringgit per ton for pure Malaysian companies.
Meanwhile, MIDF Research said in a note that it forecasts that average local CPO delivery prices would close lower by 7.5 percent month on month to 3,260 ringgit per ton in July, or decline by 19.1 percent quarter on quarter to 3,112 ringgit per ton in the third quarter as a result of the peak crop seasonality amidst sluggish demand on no festival ahead.
In June, the local CPO delivery price jumped to 3,730 ringgit per ton but still averaged monthly lower at 3,525 ringgit per ton following the decrease of other vegetable oil prices trend.
The research house has maintained its neutral stance on the sector with a CPO target price of 3,500 ringgit per ton for 2023.
It said a key downside risk for CPO price remains due to a fragile demand outlook on the back of inflationary pressure coupled with tight household spending on high base interest rates locally and globally, narrowed price discount parity between CPO against soybean oil (SBO) averaged at 190.2 U.S. dollars per ton.
Maybank Investment Bank also said in a note that the anticipation of a seasonal pickup in the second half output will continue to keep CPO prices in check in the near term.
The research house opined that the market is still anticipating improving CPO production prospects as the industry enters into its seasonal peak output period in the second half.
According to the research house, the anticipated production recovery in Malaysia in the second half is also premised on the recent influx of guest workers since end-2022.
It also said the fragile global macroeconomic outlook will continue to be seen as a headwind for CPO prices in the immediate term, capping the upside of CPO prices.
Its full-year CPO price forecast stands at 3,400 ringgit per ton.
TA Securities also said in a note that it expects CPO production to grow in the second half of the year with the ease of labor shortages.
It also noted that macro risks and the impact of the global economic slowdown as well as high-interest rates will affect commodity prices.
All in all, it expects the second half of CPO prices to be in the range of 3,900 ringgit to 4,200 ringgit per tonne. (1 ringgit equals 0.21 U.S. dollar)
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