MARKET DEVELOPMENT
CIMB Research Retains Neutral Outlook on Plantations
CIMB Research Retains Neutral Outlook on Plantations
11/09/2014 (The Star) - CIMB Equities Research is maintaining its Neutral outlook for the plantation sector after the bumper harvest for oil palm in August.
It said on Thursday there could be downside risk to its 2014 average crude palm oil (CPO) price forecast of RM2,700 per tonne as the average CPO price achieved in January-August 2014 was only RM2,502 per tonne.
“We maintain our Neutral rating for the sector as most of the planters are fairly valued at their current share prices,” it said.
Palm oil stocks in Malaysia rose 23% on-month to 2.05 million tonnes at end-August 2014.
CIMB Research said this was 4.5% above our and consensus forecasts due to higher-than-expected production.
Fresh fruit bunches (FFB) production jumped 22% on-month to a record monthly high of 2.03 million tonnes in August. This is likely due to the spillover of harvesting from July to August in 2014 as a result of the Hari Raya festival in the last week of July.
“The higher-than-expected palm oil inventory is negative for CPO prices as it suggests there is ample supply of edible oils in the near-term, which may cause certain buyers to defer their purchases.
“However, this would be partially offset by the strong 41% jump in palm oil exports in the first 10 days of September from the same period in August,” it said.
CIMB Research said for September 2014, it projects that palm oil stocks in Malaysia could rise by 15% on-month to 2.36 million tonnes, driven by higher production.
As such, it expects CPO prices to trade in the range of RM1,900 to RM2,200 per tonne in September 2014. During the past month, the main cause of the dampened global edible oil prices was the rising global oilseeds and edible oils supply.
The key factor that supported CPO price was the anticipation of stronger biodiesel demand due to the firm crude oil prices.
However, the crude oil price recently dropped below US$100 per tonne, a 15-month low. This translates into a CPO biodiesel break-even price of RM2,270 per tonne.
It said on Thursday there could be downside risk to its 2014 average crude palm oil (CPO) price forecast of RM2,700 per tonne as the average CPO price achieved in January-August 2014 was only RM2,502 per tonne.
“We maintain our Neutral rating for the sector as most of the planters are fairly valued at their current share prices,” it said.
Palm oil stocks in Malaysia rose 23% on-month to 2.05 million tonnes at end-August 2014.
CIMB Research said this was 4.5% above our and consensus forecasts due to higher-than-expected production.
Fresh fruit bunches (FFB) production jumped 22% on-month to a record monthly high of 2.03 million tonnes in August. This is likely due to the spillover of harvesting from July to August in 2014 as a result of the Hari Raya festival in the last week of July.
“The higher-than-expected palm oil inventory is negative for CPO prices as it suggests there is ample supply of edible oils in the near-term, which may cause certain buyers to defer their purchases.
“However, this would be partially offset by the strong 41% jump in palm oil exports in the first 10 days of September from the same period in August,” it said.
CIMB Research said for September 2014, it projects that palm oil stocks in Malaysia could rise by 15% on-month to 2.36 million tonnes, driven by higher production.
As such, it expects CPO prices to trade in the range of RM1,900 to RM2,200 per tonne in September 2014. During the past month, the main cause of the dampened global edible oil prices was the rising global oilseeds and edible oils supply.
The key factor that supported CPO price was the anticipation of stronger biodiesel demand due to the firm crude oil prices.
However, the crude oil price recently dropped below US$100 per tonne, a 15-month low. This translates into a CPO biodiesel break-even price of RM2,270 per tonne.