MARKET DEVELOPMENT
CPO Prices Expected To Be Subdued in 2018
CPO Prices Expected To Be Subdued in 2018
11/10/2017 (The Star) - Crude palm oil (CPO) prices for 2018 are expected to be subdued compared to 2017 as post-El Nino output growth is likely to continue into the year, said Maybank Investment Bank Research.
"We tweak our 2018 CPO ASP forecast to MYR2,600/t (+4%), which is still lower than our 2017 revised CPO ASP forecast of MYR2,700/t (+12.5%). Given the lack of strong catalysts, we maintain our 12M NEUTRAL view on the sector," it said.
The research firm initiated coverage on DSNG with a Buy call and Eagle High with a Sell call. It also has a Buy call on IOI, SOP, BAL and TBLA and downgraded AALI and LSIP to Sell.
The research firm expects a small build-up of global 17 oils and fats (O&F) inventory for the second consecutive year.
"According to Oil World, the 17 O&F stock-to-usage ratio (SUR) is expected to climb by 0.6-ppts to 12.9% in the 2017/18F marketing year, which is still way below the peak of 15.7% recorded in 2014/15. We consider the SUR to be moderately tight.
"Palm oil will lead the supply growth (+3.2m MT), partly due to the anticipated full recovery of output post El Nino. Hence, 2018’s CPO ASP will likely average lower than 2017, but compensated by higher output."
Malaysia's CPO stockpile breached the 2.0MT psychological level in September 2017, coninciding with the current peak palm oil output months amidst ongoing US soybean harvest.
"Barring any negative weather surprises, 2017’s US soybean harvest is anticipated to be the second largest on record, after 2016’s record output of 4,307m bushels. Post seasonal CPO price correction in 4Q17, we anticipate price to rebound in 1Q18 when output is seasonally the weakest."
In light of the higher-than-expected spot CPO prices in 9M2017, Maybank IB Research raised its 2017-2018 CPO ASP forecasts by 12.5% to RM2,700 per tonne and 4% to RM2,600 per tonne respectively .
It has also adjusted its FFB output forecasts for stocks under coverage by +3% to -18%, leading to -26% to +25% changes in its FY17-18 core net profit forecasts for stocks under coverage.
It maintains its 12M Netural call on the sector.
"We tweak our 2018 CPO ASP forecast to MYR2,600/t (+4%), which is still lower than our 2017 revised CPO ASP forecast of MYR2,700/t (+12.5%). Given the lack of strong catalysts, we maintain our 12M NEUTRAL view on the sector," it said.
The research firm initiated coverage on DSNG with a Buy call and Eagle High with a Sell call. It also has a Buy call on IOI, SOP, BAL and TBLA and downgraded AALI and LSIP to Sell.
The research firm expects a small build-up of global 17 oils and fats (O&F) inventory for the second consecutive year.
"According to Oil World, the 17 O&F stock-to-usage ratio (SUR) is expected to climb by 0.6-ppts to 12.9% in the 2017/18F marketing year, which is still way below the peak of 15.7% recorded in 2014/15. We consider the SUR to be moderately tight.
"Palm oil will lead the supply growth (+3.2m MT), partly due to the anticipated full recovery of output post El Nino. Hence, 2018’s CPO ASP will likely average lower than 2017, but compensated by higher output."
Malaysia's CPO stockpile breached the 2.0MT psychological level in September 2017, coninciding with the current peak palm oil output months amidst ongoing US soybean harvest.
"Barring any negative weather surprises, 2017’s US soybean harvest is anticipated to be the second largest on record, after 2016’s record output of 4,307m bushels. Post seasonal CPO price correction in 4Q17, we anticipate price to rebound in 1Q18 when output is seasonally the weakest."
In light of the higher-than-expected spot CPO prices in 9M2017, Maybank IB Research raised its 2017-2018 CPO ASP forecasts by 12.5% to RM2,700 per tonne and 4% to RM2,600 per tonne respectively .
It has also adjusted its FFB output forecasts for stocks under coverage by +3% to -18%, leading to -26% to +25% changes in its FY17-18 core net profit forecasts for stocks under coverage.
It maintains its 12M Netural call on the sector.