Weather, as one of the more important aspects for palm oil planters to worry about for their production during the year, is rapidly changing
A sudden change in weather condition – especially dry and hot weather for a extended period – can negatively affect production and output of palm oil.
As one of the plantation experts Dorab Mistry said, the weather is expected to shape the production and price of the crude palm oil (CPO) this year.
“In the event that El Nino develops, I believe CPO futures will cling to RM3,000 beyond June.
“(Palm oil) production is likely to be affected from late 2014 onwards and we may be staring (at) RM3,500.
“However if rains come as normal and the high cycle kicks in from July onwards, prices can trade in a range between RM2,900 and RM2,600 from July until October.
“Palm oil production is under-performing and stocks are tight,” he said during a palm oil conference in Kuala Lumpur earlier this year.
At the same time, Mistry highlighted some new developments within the oil palm industry which could steer the palm oil market into a new dynamic cycle.
“There is going to be a big expansion of bio diesel capacity in Indonesia in the near future.
“This capacity will require bio diesel producers to lock in palm oil prices at least one year in advance. Almost all of them will be plantation linked.
“Hence, the availability of freely tradable palm oil will become somewhat restricted. It will also require much larger stocks to be maintained.
“Therefore, palm oil stocks will need to be much larger before they begin to exert any pressure on prices.
“For these reasons, I believe the Indonesian mandate is truly a ‘Game Changer’ and will keep palm oil prices relatively high for a long time,” Mistry observed.
On the contrary, he believed there is a small likelihood of production surpassing expectation if rainfall is better than normal.
“If prices of Brent (crude oil) fall and production of world oilseeds is also as expected, palm oil prices can fall below RM2,400 but that possibility is no more than 30 per cent,” he pointed out.
While Mistry, a director of India-based Godrej International Ltd, has his own view on the palm oil market, local analysts hinted at a similar scenario, citing change in weather conditions and palm oil inventory level being the prime aspects affecting the outlook of the plantation industry.
M&A Securities Sdn Bhd (M&A Securities) in a report dated June 26 entitled ‘Betting on El-Nino for palm oil price up-cycle’ said weather plays an important role in the supply equation of production and yield, and particularly one of the key catalysts of CPO price movement.
The hot and dry weather of late is expected to persist for another few months as predicted by the Malaysian Meteorlogical Department. The situation has cause caustic reaction as people wonder whether El-Nino spell had started or otherwise.
Citing the Department of Meteorlogical Malaysia, M&A Securities said the current situations are due to the Southwest Monsoon (dry season for Malaysia) that has started in May and is expected to persist until September.
Surveys by international weather forecasters still indicated that there is a 70 per cent likelihood of the El Nino happening in 2014.
Read more: http://www.theborneopost.com/2014/07/13/el-nino-a-wild-card-for-planters/#ixzz37MaXnHdO
No comments:
Post a Comment