25/07/2011 (Borneo Post) - Growth momentum for palm oil exports is expected to pick up in the second half of 2011 (2H11) despite its slow pace in the early part of 2011.

“Going forward into the later part of the year, exports will most likely improve, h analyst James Ratnam of TA Securities Holdings Bhd told The Borneo Post in a recent phone interview.

gAs we take into account the trend of palm oil exports from January to March 2011 and April to June 2011, exports have been increasing. Although it was hovering within the negative range between January to March 2011, it however picked up during April to June.

“Exports have increased by 12.3 per cent month-on-month (m-o-m) from May to June and 9.5 per cent year-on-year (y-o-y) as compared to June 2010, h said Ratnam.

According to Ratnam, the increase in exports would most likely be boosted by the upcoming festivities like Hari Raya and Deepavali.

However, despite the optimism proposed by Ratnam, analysts at UOB Kay Hian (Malaysia) Holdings Sdn Bhd (UOB Kay Hian) remained wary of future exports prospect.

“Based on the latest available export data form Indonesia and Malaysia, exports have contracted and it is a bit worrisome as they may not meet our 3.3 per cent growth forecast for 2011, h they forewarned.

“The peak season for palm oil exports is usually April to August when there is festive demand, but exports for April to June did not support the usual high demand pattern, h noted the research team.

With the conflicting responses from both parties in relation to the exports performance, both parties concurred that a widening price discount to soybean prices would support a positive growth in exports.

“On the long-term average, price discount to soybean had been US$120 per tonne. However now, the price discount had increased to US$220 per tonne. This can lead to a wider preference for palm oil hence boosting its overall exports, h said Ratnam.

This was affirmed by UOB Kay Hian, opining that China fs measure to lift its price control on cooking oil would increase the demand for imported soybean and hence its prices. Such a move, according to UOB Kay Hian, could lead to a switch in demand from soybean oil to palm oil from price sensitive countries like India, Pakistan and China.

Moving ahead, with regards to the crude palm oil prices (CPO), Ratnam forecasted a price of RM3,200 per tonne on the back of higher demand and borrowed strength from competing oils like soybean oil.

UOB Kay Hian analysts on the other hand were more bearish to the CPO price and expected it to move sideways. As inventory was high due to improving fresh fruit bunch yield in the past three months, CPO prices according to the research firm was unlikely to trend up.

Hence, the research team maintained its net profit forecasts and 2011 to 2012 CPO average selling price assumptions of RM2,900 per tonne and RM2,700 per tonne respectively.