Crude Palm Oil: Update

On New Year's Eve, crude palm oil (CPO) closed up RM68 or 2.62% at RM2,663, a 7 month high. A retest of the high achieved this year at RM2,790 in May is on the cards.

CPO price is more likely to rise than fall in 2010 because of:

1. Demand from the world's top two consumers of vegetable oils: China and India. This demand is expected to increase as economies improve.

2. Bad weather in the Americas leading to lower soybean yields. This leads to lower soyoil production and higher prices. CPO is a substitute which is also less expensive.

3. Crude oil's price movement which is expected to continue rising as a cold winter increases demand for heating fuel in the short term and economies improve through 2010. CPO is an important source of biofuel and would most likely ride the wave up.
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