MARKET DEVELOPMENT
Booster For Palm Oil Sector From Bullish USDA Outlook
Booster For Palm Oil Sector From Bullish USDA Outlook
14/08/2013 (Borneo Post) - In its latest World Agricultural Supply and Demand Estimates (WASDE) report, the US Department of Agriculture (USDA) unexpectedly cuts its US soybean production estimate by five per cent to 88.60 million metric tonnes (mmt) or three per cent below the consensus forecast of 91.36mmt mainly on lower harvested area and yield estimates.
According to Kenanga Investment Bank Bhd’s research analyst Alan Lim, this move may be caused by crop planting delays in the US this season as soybean planting success rate and its final yield are very sensitive to timing and weather issues.
By itself, the news of the lower than expected US soybean production should be positive to CPO prices.
Due to the cut in the soybean production the global soybean production was also reduced by 1.5 per cent to 281.72mmt from July-13 estimate of 285.89mmt. Accordingly, the USDA has revised down its 2013/2014 season global soybean inventory estimate by 1.5 per cent to 281.72mmt.
By itself, the news of the lower than expected US soybean production should be positive to crude palm oil (CPO) prices. Insufficient soybean will lead to low soybean oil supply globally and this will increase demand for palm oil, which is commonly used as soybean oil substitute.
As it is, the soybean oil price has surged 2.1 per cent to 42.75 cents per pound on the CBOT market overnight. Despite the hike, soybean oil prices may have more upside as it is still trading below USDA estimate of 44 to 48 cents per pound.
Insufficient soybean will lead to low soybean oil supply globally and this will increase demand for palm oil, which is commonly used as a substitute.
Locally, palm oil export jumped 18.5 per cent in first 10 days of August and this should also be positive to CPO prices as well.
The latest data release by Intertek has shown a significant improvement in Malaysia palm oil exports.
“We believe the surge in demand could be caused by the return of China demand for palm oil due to stock up activity ahead of Mid-Autumn festival. While we are expecting August improvement in exports, we wish to highlight that the first 10-day data is usually not representative on the quantum of the exports growth as we only expect a single-digit export growth.
“Still, the better demand should be positive to CPO prices as the overall demand outlook has improved,” Lim noted.
“Despite our bullishness on CPO prices, we believe that current share prices for big cap planters are already reflecting valuation of CPO prices at RM2,700 per metric tonne for 2014.”
According to Kenanga Investment Bank Bhd’s research analyst Alan Lim, this move may be caused by crop planting delays in the US this season as soybean planting success rate and its final yield are very sensitive to timing and weather issues.
By itself, the news of the lower than expected US soybean production should be positive to CPO prices.
Due to the cut in the soybean production the global soybean production was also reduced by 1.5 per cent to 281.72mmt from July-13 estimate of 285.89mmt. Accordingly, the USDA has revised down its 2013/2014 season global soybean inventory estimate by 1.5 per cent to 281.72mmt.
By itself, the news of the lower than expected US soybean production should be positive to crude palm oil (CPO) prices. Insufficient soybean will lead to low soybean oil supply globally and this will increase demand for palm oil, which is commonly used as soybean oil substitute.
As it is, the soybean oil price has surged 2.1 per cent to 42.75 cents per pound on the CBOT market overnight. Despite the hike, soybean oil prices may have more upside as it is still trading below USDA estimate of 44 to 48 cents per pound.
Insufficient soybean will lead to low soybean oil supply globally and this will increase demand for palm oil, which is commonly used as a substitute.
Locally, palm oil export jumped 18.5 per cent in first 10 days of August and this should also be positive to CPO prices as well.
The latest data release by Intertek has shown a significant improvement in Malaysia palm oil exports.
“We believe the surge in demand could be caused by the return of China demand for palm oil due to stock up activity ahead of Mid-Autumn festival. While we are expecting August improvement in exports, we wish to highlight that the first 10-day data is usually not representative on the quantum of the exports growth as we only expect a single-digit export growth.
“Still, the better demand should be positive to CPO prices as the overall demand outlook has improved,” Lim noted.
“Despite our bullishness on CPO prices, we believe that current share prices for big cap planters are already reflecting valuation of CPO prices at RM2,700 per metric tonne for 2014.”