Commodities are set to stay bullish at least until the first half of 2011, thanks to the continued strength of major global commodities, particularly gold and crude oil, which have shown few signs of losing steam.

As at press time, gold surged close to its all-time high of US$1,424.60 per ounce recorded in November as investors swarmed for gold as a safe alternative to paper currencies following a disappointing US November jobs report which triggered concerns over the strength of the US economic recovery.

The price of crude oil, which of late has been a crucial price determinant for Malaysia’s crude palm oil (CPO) and rubber grades like SMR 20 and Latex-in-Bulk, had also crossed the US$91-a-barrel mark as at press time with analysts predicting the price would touch US$100 a barrel or more by the year-end.

JP Morgan, in its latest oil price forecast, expected the North Sea Brent to hit US$100 by the first half of 2011 and US$120 a barrel before the end of 2012 as consumption grows in emerging economies and the Organisation of Petroleum Exporting Countries (Opec) seen unlikely to increase production in the first half of 2011.

On the local front, international palm oil experts and analysts are generally positive on the price of CPO.

Factors that will support the CPO price rally are rising global demand over tight supplies which are affected by drought and unusually heavy rain caused by La Nina, said Dorab Mistry of Godrej International Ltd at a palm oil conference in Bali recently.

The La Nina could curb palm oil production in Malaysia, Indonesia and also affect soybean production in South America. China and India are expected to remain as the top importers of palm oil next year.

LMC International managing director Dr James Fry, meanwhile, expects CPO prices to slump to RM2,600 per tonne by June as ?higher palm oil and soybean oil prices will cause biodiesel users to defer purchases to the second half of 2011.? OSK Research has raised its 2011 target for average CPO price to RM2,700 from RM2,250 a tonne to reflect the continued strength of crude oil.

As at press time on Dec 3, CPO futures had rallied by 32% this year to above RM3,500 a tonne – the highest since July 2008 and could hit RM3,600 a tonne before the year-end.

CPO reached an all-time high of RM4,486 per tonne in May 2008.

Rubber grades SMR 20 and Latex-in-Bulk prices would also find comfort zones in 2011, given rising global consumption amid tight supply situation.

Major rubber producing areas in southern Thailand and northern Malaysia were badly affected by flash floods in November.

Global consumption of natural rubber will also outpace supply by 313,000 tonnes in 2011, the most since 2006, according to a Goldman Sachs Group Inc forecast in a November report.

The Association of Natural Rubber Producing Countries (ANRPC) senior analyst Jom Jacob expects the production of member countries to hit 9.9 million tonnes in 2011, up 4.3% from 2010. The ANRPC accounts for over 90% of the world’s rubber production.

As at press time, SMR 20 had set a new record at RM1,340 per tonne while Latex-in-Bulk jumped to RM910 per tonne. As for tin, it will share the same bullish outlook for 2011, according to Malaysian Smelting Corp Bhd group chief executive officer Datuk Seri Ajib Anuar.

While there is some scope for tin production to rise in response to high prices, it will be limited.

?Lack of exploration and investment in the past as well as long lead time to start a new mine will continue to delay new project start-ups,? says Ajib.

Many of the new projects under exploration and developments will unlikely go into operation before 2013.

?We expect the market to remain in deficit in 2011 and 2012. Tin demand is expected to remain stable, growing at a forecast rate of about 3% to 4% over the next two years,? he says.

In 2010, world tin prices rebounded strongly, rising 59% to US$19,836 per tonne from an average US$12,493 per tonne over the course of the year to November, peaking at a record level of US$26,977 per tonne in October.

After reaching a six-year high of almost 28,000 tonnes as at end-January 2010, the London Metal Exchange recorded a 44% fall in tin production to about 15,000 tonnes in December.

World tin demand is expected to have risen by about 15% to 342,000 tonnes in 2010.

?Nearly all recent growth in tin usage has been driven by the expansion of the electronics industry in Asia,? Ajib says.

Meanwhile, cocoa, Malaysia’s best kept secret commodity, will likely remain stable in 2011, according to Malaysian Cocoa Board (MCB) director-general Datuk Dr Azhar Ismail. Given the higher cocoa prices, Malaysia’s export earnings from cocoa products could conservatively surpass RM3.5bil in 2010 from RM3.2bil in 2009.

?Cocoa dried beans in Ranau (Sabah) and Raub (Pahang) are currently fetching about RM8,700 per tonne, which can be considered very good price for cocoa smallholders,? says Azhar.

He also expects cocoa prices to stabilise at current levels in 2011. ?With the world cocoa price set to sustain at current remunerative level, cocoa farmers are expected to get comparatively good margins,? he says.

While Malaysia does not export cocoa beans, its end-products like cocoa butter, cocoa powder, hand-made chocolates are fetching good prices in the international markets.

As for MCB, Azhar says the board will undertake more R&D work this year in terms of producing more new clones and higher yielding planting materials.