Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Fitch Solutions sees palm oil prices falling to RM2,200/tonne in 2027

by Surin Murugiah

Near-term palm oil price forecasts of annual averages of RM3,800/tonne through 2023, with upside risks, and RM3,400/tonne through 2024.

In the immediate term, bullish sentiment is based upon Mainland Chinese demand following its reopening, and reports that Indonesia is set to suspend some palm oil export licences on a temporary basis, along with the depreciation of the Malaysian ringgit.

Demand uncertainties due to elevated edible oil stocks in India (and Bangladesh), as well as macroeconomic conditions in Pakistan.

“We now forecast that the global palm oil market will produce a narrow deficit in 2022/23, the first annual net negative position since 2015/16 due to an increase in the Indonesian biofuel blending mandate".

Fitch Solutions said it sees prices falling to RM2,200/tonne in 2027 alongside a gradual loosening of the global production balance, on the back of a continued decline in EU palm oil demand, while noting downward pressures on production growth in Indonesia and Malaysia.

The firm said that on the supply side, one factor driving the price reversal has been concern pertaining to the strength of production in Malaysia.

Up to Feb 20, Malaysia’s palm oil production was estimated to have fallen 6.7% month-on-month, while exports were up 30.0% over the same period in January, indicating a further drawdown of inventories and a tighter global market ahead.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/657471

[winston]

POC2023 Summary (Main Speakers):

1) Thomas Mielke = Bullish in 2H
- Malaysian Rbd Palm Olein Prices Seen At $1150 /T in Second Half Of 2023
- Vegetable Oil Prices Could Rise in Second Half Of 2023 And 2024 On Rising Biofuel Demand

2) James Fry = Bearish in Q4
- Palm oil futures contract will trade at 3,350 ringgit per tonne by the end of the year
- Malaysia benchmark crude palm oil futures FCPOc3 will average 3,760 ringgit ($831.86) a tonne in 2023, down from 4,920 ringgit in 2022, pressured by lower gasoil prices
- Rotterdam Crude Palm Oil Will Average At $940/T In 2023 Vs $1,350/T In 2022

3) Dorab Mistry = Bullish in 1H
- Malaysia's Palm Oil Seen Trading Between 4,000 To 5,000 Rgt/T Between Now and August
- Malaysian Palm Oil Stocks to Fall Until May, Will Go Below 2 Mln T
- Indonesia's Biodiesel Programme to Keep Palm Oil Stocks Tight in The H1 2023
- Development Of El Nino Weather Pattern to Determine Palm Oil Prices in H2 2023

[winston]

Plantation – Malaysia Palm Oil Production Upcycle Coming Soon

End-Feb 23 inventory came in lower than market expectations but still failed to lift CPO prices, mainly due to the weakness in oilseeds and other vegoils.

The lower inventory was mainly due to lower imports and high domestic consumption.

We expect strong production in the upcoming months as La Nina has ended.

We also expect demand to improve in Mar 23, with Malaysia players benefitting from a slowdown in Indonesian exports.

Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... abc3e224d4

[winston]

July 11, 2023

June’s MPOB stockpile grew slower than expected
CPO price needs to be more competitive

June’s MPOB stockpile turned out softer than expected on weak June output but strong domestic consumption.

Anticipation of a seasonal pickup in 2H output will continue to keep CPO prices in check in the near term (unless output recovery disappoints again).

The present healthy CPO price discount against other competing veg oils are required to help stimulatebdemand in 2H.

Stay NEUTRAL for now while we monitor weatherbdevelopment in July & August.

Preferred BUYs are KLK, FR, & BAL.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/327972.pdf

[winston]

Plantation – Regional
Disruptive Weather Hitting Production

CPO prices have recovered 20% from 1 Jun 23 as CPO production came in lower than expected
in 2Q23 as highlighted in our sector report dated 22 May 23.

We have revised down 2023 global palm oil production by 2% after taking into consideration lower production.

We increase our CPO ASP for 2024 to RM4,200/tonne and roll over our valuation to 2024.

Upgrade to OVERWEIGHT as we expect the sector to see a stronger share price performance, along with our forecast of a CPO price uptrend in 3Q23-1H24.

Source: UOBKH

https://research.uobkayhian.com/content ... 8ed2198299

[winston]

Situational play again, but with headwinds ahead
Pricing in war premium again

CPO price and plantations stocks are off to a good start in 2H 2023, in part due to recent escalations in the Russia-Ukraine conflict.

While positive in the short term price impact, an eventual resolution relating to trade may
quickly reverse some of these gains.

In the US, crop conditions have improved sharply due to recent favourable weather. Closer to home, we see the upcoming seasonal peak crop and lackluster 2Q results as near term headwinds.

For now, however, the sector appears good for a trade.

Preferred BUYs: KLK, FR, BAL & TAH.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/330281.pdf

[winston]

Plantation – Malaysia

Slight Bullish Data As End-Stock Up Only Marginally, Thanks To Strong Exports

Jul 23’s palm oil inventory came in lower than market estimates mainly due to better than-expected exports and domestic consumption which have offset the higher imports.

We expect inventory levels to increase marginally, driven largely by higher production, while exports should remain steady.

Maintain OVERWEIGHT and recommend BUY on upstream players as we believe that CPO prices will trend higher and sector earnings will improve in 2H23.

Source: UOBKH

https://research.uobkayhian.com/content ... 9d4d7ae6d1

[winston]

RHB remains neutral on plantation sector on gradual improvements in palm oil stocks

By Sufi Muhamad

RHB Research maintained its RM3,900 per tonne crude palm oil (CPO) price assumption for 2023 and 2024, and continued to prefer Malaysian players over Indonesian planters, as the Indonesia’s tax structure and currency appreciation makes earnings less competitive.

Source: theedgemalaysia.com

https://theedgemalaysia.com/node/678291

[winston]

Regional Plantations
Raising our 2023/24E CPO ASPs to MYR3,700/3,500 per tonne

EPS revisions to reflect output and cost pressures too

MY’s 7M23 CPO output (-2% YoY) came in lower than expected, raising concerns that 2023’s output could end up lower than 2022.

While we anticipate CPO price to weaken in 2H23 on seasonal output recovery, we now raise our 2023-24 CPO ASPs (per t) to MYR3,700/3,500 (from 3,400/ 3,200) on lower-than-expected output (thus, higher-than-expected ASPs) YTD, higher cost pressures, as well as some El Nino and war risk premiums.

We will review our EPS forecasts under coverage in the upcoming results season to reflect revisions to ASPs, output and unit cost.

As we have forewarned, we expect a challenging 2Q earnings outlook.

Stay NEUTRAL. Preferred BUYs: KLK, FR, & BAL.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/333703.pdf

[winston]

HLIB expects mixed 2Q performance from plantation sector

By Sufi Muhamad

The research house said in a sector note that this is due to mixed quarter-on-quarter (q-o-q) fresh fruit bunch (FFB) output growth and slightly lower crude palm oil (CPO) prices.

It maintained its “neutral” call on the sector, with its top pick being IOI Corp Bhd, given its valuations.

Source: theedgemalaysia.com

https://theedgemalaysia.com/node/679012