Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Palm oil prices to rally in first half of 2021, say top analysts

by Mei Mei Chu and Rajendra Jadhav

KUALA LUMPUR/MUMBAI (Oct 8): Palm oil prices are likely to jump in the first half of 2021, three leading industry analysts said in a webinar on Thursday, as La Nina weather pattern is set to hit edible oil supplies amid lower soybean crushing in Argentina and rising sunflower oil prices.

Heavy rainfall brought on by La Nina has started to disrupt output in Southeast Asian palm producing countries and will bring down global supply this year, said analyst James Fry.

However, the rain and better estate maintenance due to current high palm prices will significantly boost supply in 2021, said Fry, who heads commodities consultancy LMC International.

"Look out for a La Nina-induced price rally from January 2021 with soyoil leading the way," said Dorab Mistry, director of Indian consumer goods company Godrej International.

Vegetable oil prices next year should be higher due to improved demand and tighter supply of soft oils such as soyoil and sunflower oil, Mistry said.

Thomas Mielke, the executive director of Oil World, forecast Indonesian crude palm oil price in January-June 2021 would rise to US$700 a tonne.

Malaysia's benchmark crude palm oil contract has slumped about 7% so far this year, to RM2,888 (US$695.90) a tonne on Thursday, as the COVID-19 pandemic hurt demand.

Losses were pared by a recent rally in edible oil prices due to stockpiling by top buyer China for food security measures.

The rally in sunflower oil due to a lower crop has also been making soyoil and palm oil attractive to price sensitive buyers.

China's stocking policy is expected to continue with fund buying and, combined with problems in Argentina's soybean crushing, could further increase palm prices, Mielke said.

"If consumer buying plus funds buying (come together), it is possible that we temporarily reach RM3,200," he said.

Argentina's soy crushing volume is set to drop around 9.5% this year, as growers in the world's top exporter of processed soymeal and soyoil hoard beans due to unfavourable prices and taxes.

But Fry warned higher palm prices could dampen consumer demand, especially in lower income countries.

Besides, the higher palm prices cannot sustain without higher crude prices, he added.

Source: The Edge

https://www.theedgemarkets.com/article/ ... p-analysts

[winston]

RN: REGIONAL PLANTATIONS
Low Sept stockpile supportive of CPO price for now

Sector Note

Healthy Sept exports helped kept Malaysia’s stockpile low, aided by zero CPO export levy and weak 3Q20 Indonesian (ID) output.

We believe a relatively stronger 4Q20 ID’s FFB output recovery may cap near term CPO price upside.

Next year, given expectation of a strong output recovery post biological tree stress in ID, aided by anticipated good rainfall due to La Nina, we are keeping our CPO ASP est. of MYR2,400/t.

NEUTRAL call is unchanged.

BUYs remain with FR, BAL, SOP, BPLANT. SELL IOI and GENP.

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/1 ... fbd601.pdf

[winston]

Plantation – Malaysia
Inventory Level Starts To Climb

Palm oil inventory level has started to climb to 1.73m tonnes in Sep 20 with flat production growth and a marginal increase in exports.

Although exports had increasedby 2% mom (mainly contributed by India), we reckon that demand would start to slow down as we are entering the winter season.

We maintain MARKET WEIGHT as we expect CPO prices to normalise in the near term on the back of an expected increase in global CPO production, while the recent high price will lead to demand rationing.

Source: UOBKH

https://research.uobkayhian.com/content ... 405dc2d256

[winston]

Buoyant prices until yearend

Malaysia’s CPO stockpile held up well in September 2020

Exports remained firm despite rising prices

La Nina – a friend or foe?

Top BUYs – First Resources (FR), Wilmar (WIL), Lonsum (LSIP) and KL Kepong (KLK)

Source: DBS

https://researchwise.dbsvresearch.com/R ... =fhiaakhab

[winston]

MALAYSIA PLANTATIONS
3Q20 plantation results roundup: Outperformer | POSITIVE

Plantation is one of the few sectors that delivered strong 3Q PATMI growth (+152% YoY, +40% QoQ) in a year subdued by COVID-19 pandemic.

Cumulative 9M20, the sector delivered +142% YoY PATMI growth. Looking forward, we expect high CPO price to sustain 4Q20’s earnings growth.

During 3Q results season, we upgraded TAH, TSH & KLK to BUY (from HOLD), and IOI & GENP to HOLD (from SELL).

We also raised the sector to Positive (from Neutral). Our MY top picks are KLK, SOP and BPLANT.

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/2 ... 2fef7b.pdf

[winston]

Potential impact of export levy revision

Indonesia’s revised progressive export levy structure is negative for upstream Indonesia palm oil producers but slightly positive for downstream players.

Malaysian upstream palm oil players are likely beneficiaries of this news.

The changes will ensure the continuity of Indonesia’s B30 mandate.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... ca2d3b5775

[winston]

not vested

Ta Ann
A beneficiary of the CPO price rally

9M20 results were above expectations due to better-than-expected CPO prices achieved.

We forecast sequentially lower 4Q20F earnings as we expect seasonally weaker FFB production to offset the higher CPO price.

We raise our earnings forecast for FY20F and upgrade our SOP-based target price to RM3.39 amid rising CPO prices. Reiterate Add.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 0920F41315

[winston]

Plantation – Malaysia
Inventory Level Remains Low; Exports Are Still Sluggish

Palm oil inventory remained low in Nov 20, mainly due to lower CPO production.

Exports are likely to remain weak in Dec 20 and the impact from the 10% import duty cut
by India’s government is likely to be seen only in Jan-Mar 21.

We maintain MARKET WEIGHT even though we expect CPO prices to stay firm at a trading range of RM2,800-3,200/tonne in 1H21, as we remain concerned over the potential demand rationing due to high prices.

Source: UOBKH

https://research.uobkayhian.com/content ... 93bd0c36fb

[winston]

Maintain NEUTRAL with Top Picks: Wilmar International, First Resources, Sarawak Oil Palms and Kuala Lumpur Kepong.

Malaysia’s production fell further in November, an early start to the low season.

We expect output to remain weak until 1Q21, thereby buoying CPO prices, before improving in late-2Q21 – leading to a moderation in prices.

Still NEUTRAL on the sector. While we expect prices to remain buoyant until 1Q21 on low stock levels and the low output season, we believe prices would moderate from late-2Q20, as productivity improves.

Risks include: La Nina impact worsening in South America, crude oil prices reversing its trend, Malaysian labour shortage exacerbating, and rising ESG concerns.

Source: RHB

https://research.rhbtradesmart.com/view ... 98389e19fe

[winston]

A palm oil alternative could help save rainforests

By Manuela Saragosa

"It's a yeast, we feed it sugars, then the yeast grows and they're able to produce large amounts of oil within their cells, and we have to squeeze out that oil or extract it".

Natural palm oil has a smooth and creamy texture, and is odourless, making it a useful ingredient in many recipes. It is semi-solid at room temperature, so it can keep things like margarine spreadable, and it has a natural preservative effect that extends the shelf life of food products.

That synthetic palm oil is between two to three times more expensive than its natural version, and that's in a best-case, most cost-effective scenario.

In shampoo or other beauty products, you might be able to compete, because price isn't the main driver.

Globally, 70% of the 75 million tonnes of palm oil consumed annually is used as cooking oil and as a food ingredient.

It estimates global consumption will rise to between 264 and 447 million tonnes by 2050, with an estimated five-fold increase in demand for palm-based biofuels by 2030.

Source: BBC News

https://www.bbc.com/news/business-55016453