Palm Oil 02 (Jun 14 - Dec 26)

[winston]

not vested

Plantations - Demand is the key factor in 2Q15

Malaysian palm oil inventories fell 12% mom to a 6-month low of 1.77m tonnes as at end-Jan 15.

We view this as a neutral event as it is in line with our and consensus estimates.

We expect palm oil output to trend higher from March onwards as the impact of flooding subsides.

As such, higher CPO demand will be critical to keep inventory manageable.

The recent proposal by the Indonesian government to provide Rp4k per litre subsidy for biodiesel in Indonesia and a more competitive CPO price discount to soybean oil will be the key factors to lift demand.

Our Neutral sector stance and top picks – First Resources, AALI and SIMP – are intact.

Source: CIMB

[winston]

not vested

Plantations - Demand is the key factor in 2Q15

Malaysian palm oil inventories fell 12% mom to a 6-month low of 1.77m tonnes as at end-Jan 15.

We view this as a neutral event as it is in line with our and consensus estimates.

We expect palm oil output to trend higher from March onwards as the impact of flooding subsides.

As such, higher CPO demand will be critical to keep inventory manageable.

The recent proposal by the Indonesian government to provide Rp4k per litre subsidy for biodiesel in Indonesia and a more competitive CPO price discount to soybean oil will be the key factors to lift demand.

Our Neutral sector stance and top picks – First Resources, AALI and SIMP – are intact.

Source: CIMB

[winston]

Plantation Companies - Bearish views dominate 2015 Palm Oil Conference

Speakers at the 2015 Palm Oil Conference mostly expect relatively strong palm oil prices in 1HCY15, followed by weaker 2HCY15 prices.

The outlook is based on near term weather related supply constraints, slower-than-expected South American soybean sales in 1HCY15, and lower crude oil prices and pick up in both soybean oil and palm oil production in 2HCY15.

Speakers did not offer price forecasts beyond 2015; consensus for this year seems to point towards an average of RM2,140/MT.

We are maintaining our palm oil price forecast of RM2,400/MT for now. Our forecast is premised on expectations that 2H15 yields would be affected by scattered dryness in 2014.

Bumitama remains our pick for SGX-listed planters.

Source: DBS

[winston]

Plantations - Indonesia to raise biodiesel blend to 15%

We are surprised by Indonesia’s plan to raise the country’s biodiesel blend from 10% to 15% as early as next week.

This is a positive development for CPO prices if the mandate is successfully executed as it would boost demand for palm oil.

We estimate that this policy could potentially raise CPO demand for domestic biodiesel usage in Indonesia by 322% to 4.8m tonnes per annum (or 16% of the
country’s total output).

However, there are three key challenges, namely:
(1) the economic viability of biodiesel vs. crude oil;
(2) the lack of enforcement; and
(3) infrastructure and logistical issues.

Until we see more concrete steps taken to achieve this biodiesel mandate, we will keep our average 2015 CPO price forecast at RM2,460 per tonne.

Our Neutral sector call is maintained.

Source: CIMB

[winston]

not vested

Plantations – Indonesia plans levy of US$50 per tonne on CPO exports

Indonesia is reportedly planning to impose a levy of US$50/tonne on exports of CPO at the zero export tax rate to fund the biodiesel mandates.

This is a departure from the earlier reported plans of lowering the CPO price threshold for the export tax.

We think the new proposal will provide the government with more stable tax revenues at low CPO prices.

Our preliminary assessment is that such a move would be negative for upstream producers, positive for downstream producers and neutral to slight
negative for integrated players in Indonesia in the short term.

However, this could be offset by medium-term gains from higher CPO prices, if the tax collected can help boost biodiesel consumption significantly.

Maintain Neutral. First Res, AALI and SIMP are our top picks

Source: CIMB

[winston]

Plantations - Tracking the return of El Nino

The Australian Bureau of Meteorology stated that there is a 70% chance of El Nino arriving in Jun.

This is not a surprise as it is broadly in line with NOAA’s (the US agency) statement that the El Nino event arrived in Mar 15.

The El Nino event has historically resulted in below-average rainfall in palm oil regions and led to higher CPO prices.

The current forecast is for a weak El Nino in 2015. This, coupled with the comfortable stockpile, is unlikely to trigger major spikes in prices unless the drought
turns out to be severe.

We maintain our Neutral rating and top picks- AALI, First Resources and SIMP

Source: CIMB

[behappyalways]

Palm oil industry 'tough going'
http://www.bbc.com/news/business-34135653

[behappyalways]

Palm oil inventories in Malaysia hit record
http://sgx.i3investor.com/servlets/fdnews/54541.jsp

[winston]

Palm oil prices seen hitting RM3000 as El Nino curbs output

Source: The Star

http://www.thestar.com.my/business/busi ... bs-output/

[winston]

Players bullish on palm oil

BY DANIEL KHOO andTOH KAR INN

“Talking about supply demand dynamics, on the supply side, we see that Indonesia has had a slowdown in the first couple of months (of the year) due to the consequences of the severe drought in 2015”

“Combined with that, is the net annual growth in production or area of cultivation for oil palm, which is slowing down because many of the big multinational companies which have signed up to the sustainability pledges are simply not able to proceed as they had done in the past.

Source: The Star

http://www.thestar.com.my/business/busi ... sh-on-cpo/