KUALA LUMPUR, June 28 (Xinhua) -- Fitch Ratings said Tuesday that it expects higher global vegetable oil output to drive a decline in crude palm oil (CPO) prices to below 1,000 U.S. dollars per tonne in the second half of the year, after averaging at around 1,500 dollars in the first half.

The rating agency said in a statement that it expects continued output growth in Indonesia to exert further pressure on prices.

According to Fitch, Indonesia's palm oil production rose by 9 percent in the first quarter, but CPO production in Malaysia was flat in the first five months of 2022.

Citing the U.S. Department of Agriculture, it said global palm oil output is forecast to jump by 8 percent from 2022 to 2023 after a flat 2021.

It expects the bulk of the growth to come from Indonesia, with Malaysian output in 2022 likely to be affected by persistent labor shortages.

According to Fitch, Malaysian benchmark crude palm oil spot prices are on track to average at around 1,500 U.S. dollars per tonne in the first half, making it the strongest six-month period in the history of CPO prices.

Prices surged in the first half amid export curbs by Indonesia, a weak production outlook in Malaysia and the concerns over the supply of substitutes, such as sunflower seed oil, due to the Russia-Ukraine war.

However, CPO prices dropped by over 300 U.S. dollars per tonne since early June following a policy shift in Indonesia to encourage exports by reducing export levies.

Fitch said the reinstatement of export curbs by Indonesia to ensure adequate domestic supply and lower supply of substitute sunflower seed oil from Ukraine are key upside risks for CPO prices. Enditem

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