Oil Palm Price on the rise

JAKARTA: Malaysian palm oil futures surged for a sixth day in a row to new 15-month highs on
Tuesday, bolstered by bullish analyst forecasts, a weakening ringgit and expectations recent dry weather and haze will curb crop output.
    By Tuesday's close, the benchmark December palm oil contract  on the Bursa Malaysia Derivatives (BMD) exchange was up 2.38 percent at 2,450 ringgit ($549.82) a tonne, after
dipping to as low as 2,352 ringitt during the morning session. 
    The benchmark touched 2,460 ringgit in the afternoon session, it's highest since June 2014.
    Traded volume stood at 72,597 lots of 25 tonnes each, roughly double the average 35,000 lots usually traded daily.
    "In the afternoon the spike came because of the news coming out of India," said a trader at a foreign commodities brokerage in Kuala Lumpur, referring to statements by leading analyst
James Fry at an industry conference in Mumbai.
    "When someone like James Fry who has been very bearish on
crude oil has suddenly turned bullish, people holding positions
take note."
    Crude palm oil (CPO) prices are likely to surge 40 percent
to $700 per tonne by mid-2016 as an El Nino weather event dents
output and as top producer Indonesia uses more palm-based
biodiesel, Fry said. 
    Prices are also being propped up by the recent weakening of
the ringgit, the trader said.
    "The Malaysian economy is still playing air walk, and
invariably when the ringgit weakens it affects the BMD, because
some people trade BMD to hedge their ringgit positions also."
    The depreciation of the ringgit, which has lost
nearly around 28 percent this year, makes palm cheaper for
offshore buyers, supporting demand and, subsequently, prices.
    Worries that El Nino, a warming of sea surface temperatures
which can lead to scorching temperatures in Asia and East
Africa, could weigh on crop yields in Asia also supported palm
prices.
    "The key now is production," a second trader said, referring
to impacts of the recent dry weather and haze on output of the
edible oil in the longer term.
    World palm oil output growth will be halved next year due to
the El Nino weather pattern, leading vegetable oil analyst
Thomas Mielke said late on Monday. 
    Meanwhile, palm oil imports by India, the world's top
importer of edible oils, are also expected to climb to record
levels in 2016, also as a result of dry weather, which is seen
restricting supplies, a veteran trader said on Monday.
 
    In competing vegetable oil markets, the U.S. December soyoil
contract was down 0.66 percent in late Asian trading,
while the most active January soybean oil contract on
the Dalian Commodity Exchange fell 1.36 percent.
    

Brunei Delegate Visit Cattle Integration

The Brunei delegate lead by the Ministry of Agriculture visited SALCRA Mongkos cattle integaration project. There were impressed with the good system practice here.

TSH, IOI said to have best CPO yield

PETALING JAYA: Malaysian plantation companies TSH Resources Bhd and IOI Corp Bhd have the best crude palm oil (CPO) yield for 2013, according to Maybank Kim Eng Research.

IOI Corp also remained one of the most profitable plantation groups on the research house’s list, although the group dropped to third spot, while TSH made it to the list of top-five most profitable planters.

Maybank KE said 2013 was a tree stress year for some plantation groups, as fresh fruit bunch (FFB) yield fell for First Resources Ltd, IJM Plantations Bhd, Golden Agri Resources Ltd, Ta Ann Holdings Bhd and PT Astra Agro Lestari Tbk (AALI).

“In terms of the best yield achieved by the groups on our list, TSH posted the best CPO yield for 2013 at 5.3 tonnes per ha, boosted by its high FFB yield of 25.3 tonnes a ha and oil extraction rate of 21%.

“This was followed by IOI Corp (5.1 tonnes per ha) and Kuala Lumpur Kepong Bhd (KLK) (4.8 tonnes per ha). The bottom-three spots were occupied by Kencana Agri at 3.3 tonnes per ha, Sarawak Oil Palms Bhd (3.4 tonnes per ha) and Boustead Plantations Bhd (3.6 tonnes per ha),” the research house said.

In terms of profitability, Singapore’s First Resources retained its top spot on Maybank KE’s list as the most profitable upstream plantation group in 2013, with an earnings before interest and tax of about RM9,620 per ha, partly supported by its locked-in sales at high prices.

Singapore-listed Bumitama Agri Ltd (BAL) moved up one spot from 2012 at the expense of IOI Corp, which dropped to third spot. TSH’s improved FFB yield have propelled the group to the top-five position.

By inference, Maybank KE said “the more profitable groups have the lower cost structure per tonne of CPO and could weather the current low CPO price” better than their peers.

Nevertheless, Maybank KE said the top-five listed oil palm planters in the world in 2013 remained unchanged from 2012, with Sime Darby Bhd (525,000ha) taking the top position, followed by Golden Agri (371,000ha), Felda Global Ventures Holdings Bhd (FGV) (335,000ha), Wilmar International Ltd (241,000ha) and Indofood Agri (239,000ha).

“Overall, the top-10 planters account for slightly under 20% of the total oil palm planted area globally,” the research house said.

Maybank KE noted that integrated players with downstream operations, diversified players and relatively low-cost producers, including IOI Corp, Sime Darby, First Resources, KLK and BAL, were least sensitive to CPO price changes.

“Those that have purer upstream exposure and relatively high all-in cost of production (per tonne) are the most leveraged due to either their relatively lower oil yield or higher cost base. They include TH Plantations Bhd, FGV, Boustead Plantations, AALI and Ta Ann, whereby for every RM100 per tonne change in the CPO average selling price (on a full-year basis), their earnings, we estimate, would change by 10%-13%,” Maybank KE said.

Bernama