Muhyiddin receiving a souvenir from Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas after officiating at the opening of the congress. Looking on are (from left) Malaysian Palm Oil Board director -general Datuk Choo Yuen May, chairman Datuk Wan Mohammad Khairil Anuar Wan Ahmad, Plantation Industries and Commodities Deputy Minister Datuk Noriah Kasnon and secretary-general Datin Paduk a Nurmala Abdul Rahim.

20/11/2013 (The Star) - Plantation stocks, led by IOI Corp Bhd and Kuala Lumpur Kepong Bhd surged, boosted by improving price outlook after the Government said crude palm oil (CPO) production this year will miss its own forecast by 1.1 million tonnes at 18.3 million tonnes.

The rally boosted the FTSE Bursa Malaysia KL Composite Index yesterday as the index jumped 14.77 point, or 0.8%, to 1,807.16 points.

Production worries have lifted CPO futures contract into bull market territory after the benchmark price climbed to RM2,628 a tonne on Nov 1, up 21% from its most recent low. The CPO futures contract for third month delivery fell 1.4% yesterday to RM2,556 a tonne.

Deputy Prime Minister Tan Sri Muhyiddin Yassin said at the Malaysian Palm Oil Board’s International Palm Oil Congress 2013 yesterday that the average price for CPO in 2014 would improve to RM2,609 a tonne from RM2,328 a tonne during the first ten months of 2013.

He said demand for CPO would be higher going forward due to the RM300 per tonne price discount compared to soybean and rapeseed oils as well as the nutritional values of palm oil.

“There is a perception by the market that demand is less than the supply of palm oil. This is ironic because palm oil is superior in terms of oxidative and thermal stability as well as versatility of applications,” he said.

The bullish outlook have prompted some analysts to review their calls on the sector.

Deutsche Bank earlier this week upgraded its call on the plantation sector with buy recommendations for key companies including IOI Corp, KL Kepong, Felda Global Ventures Holdings Bhd (FGVH) and Sime Darby Bhd.

Local analysts contacted by StarBiz yesterday were keeping a close eye on the recent upturn in CPO prices.

“It seems to be an upcycle (for the sector now) but we do not know how long this could be,” one analyst remarked.

Palm oil output is entering a seasonal weak production period that may last until February next year. Wetter than usual weather in recent weeks is also hurting production from Indonesia and Malaysia, the world’s top two producers of CPO.

Another catalyst that would hold up CPO prices was the implementation of the biodiesel programme, said another analyst.

“Indonesia’s state-owned company Pertamina’s commitment to buy biodiesel is a good start for such programmes,” she said.

Palm oil is widely used in Asia as cooking oil, but is gaining prominent in more sophisticated applications.

Muhyiddin pointed out that palm oil contains tocotrienols, a special type of vitamin E.

“Malaysia is the first in the world to extract tocotrienols from palm fatty acid distillates on a pilot plant scale,” he said yesterday.

FGVH had partnered Lipid Venture Sdn Bhd last week to undertake the development, construction, fabrication and operation of a plant to produce tocotrienol from refined bleached palm oil.