ECM Libra Investment Research has maintained that an average price of RM2,300 per tonne for crude palm oil (CPO) in the FY09 period is reasonable and ties-in with its expectations that crude oil prices would average at US$95 to US$105 per barrel next year.

It said CPO production was naturally seen to be tapering off towards end of this year, and more so in 1Q09.
"There are expectations that this will help ease current stock levels hence providing some catalyst for CPO prices to improve," it said.

ECM Libra said exports should be able to be maintained at current levels especially if CPO prices were not erratic.

"The dip in exports of late is seen to be temporary as importing countries hold back to get a more favourable purchase price. Palm oil should continue to have a market as it continues to be the cheapest edible oil source. Substitution effect will come into play given weak economic conditions hence sustaining demand for palm oil," it said.

It said the recent fall in CPO prices had indeed been unprecedented and the Malaysian Palm Oil Board believes that prices have overcorrected in the immediate term.

"While not disclosing any expectations for 2009, prices are expected to remain at current levels until year end," it said.

ECM Libra said Oil World data indicated that oils and fats consumption continues to be healthy with ending stocks data for 2008 expected to be lower than what was seen over 2006.