Friday December 10, 2004 - LOWER soy bean prices may be music to the earsof poultry farming companies that use soy bean-based feed, but forplantation companies, they would mean lower profits as crude palm oil(CPO) prices tend to trend in the same direction.

Soy oil prices have dropped by about 40% so far this year and there hasbeen a 30% decline in CPO prices, which may continue to ease further.

United Plantations Bhd executive director (finance and marketing) MartinBek-Nielsen has turned bearish on the prospects for edible oil prices overthe next six months.

"CPO prices are likely to test the RM1,300 level in the next three months,if they break RM1,386,'' he told StarBiz.

Soy bean prices have fallen due to bumper harvests in North and SouthAmerica. Besides this, Beck-Nielsen said high freight costs would also capCPO prices.

"CPO importers in Europe will tend to buy less because they are hopingthat transport costs will come down later,'' he added.

This would depress the demand for CPO and result in an increase in CPOinventory levels, Bek-Nielsen explained.

He pointed out that the inventory level, which was expected to hit 1.4million tonnes, was quite high.

CPO prices might even go below RM1,200, he said, although there was acounterweight in the weak US dollar if not for which, prices might havedropped even lower. Sellers of palm oil want more US dollars for theirproducts as the dollar is worth less than before.

Bumper harvests of soy bean have caused soy oil prices to fall to a16-month low of just below 20 US cents a pound.

That had partly led to a slide in CPO prices of almost 30% to theRM1,400-level from this year's peak of RM2,020 recorded in April. This isless than the 40% drop in soy oil prices from their peak this year of 34US cents.

Even so, plantation companies here will continue to be profitable as theircost is around RM700 a tonne