Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Malaysian palm oil price falls below 2,000 ringgit for 1st time in 3 years

Prices could decline further as stockpiles in Malaysia, the world's second largest producer and exporter, could rise from current levels.

Official data from the Malaysian Palm Oil Board on Monday showed end-October stockpiles grew 7.6 percent to 2.72 million tonnes, while production rose 6 percent to 1.96 million tonnes.

Source: The Star

https://www.thestar.com.my/business/bus ... JmODC2p.99

[winston]

Bad press on CPO as EU wants to protect own seed oil market

by Muguntan Vanar

Palm oil is getting a bad press in Europe as there is an effort to protect Europe’s own seed oil market, United Plantations Bhd Chief Executive Officer Datuk Carl Bek Nielsen said.

He said the seed oil lobby was very powerful in Europe, with the European Union promoting olive oil which enjoys subsidies in the EU budgets.

“It has got to do with market share. Look at the amount of subsidy in agricultural sector in Europe today, it takes up about 40% of the EU’s total budget.

Scientifically nothing had been found wrong with palm oil.

Admitting that there is a problem on human-elephant conflict, he said the state government is taking new approaches and is committed towards assisting in building the forest corridors to overcome the issue.

Source: The Star

https://www.thestar.com.my/business/bus ... a0qvjvm.99

[winston]

Soft commodities: CPO recovery

After a 35% fall from early 2017 to end 2018, crude palm oil prices are up about 6% this year.

Related stocks have also seen more interest and better price performance in the past few trading sessions.

On 27 Mar, Reuters reported that a senior Indonesia minister had warned that the country could consider exiting the Paris climate deal if the EU goes ahead with its plan to phase out palm oil in renewable transportation fuel.

Following this and coupled with a likely decline in Malaysian CPO inventories in Mar, CPO prices have risen steadily MTD.

Looking ahead, OCBC Treasury Research and Strategy are forecasting CPO to average RM2,400/MT in 4Q19. This would mean a ~13% upside from current levels, and are likely to support CPO related stocks as well.

Though Golden-Agri [HOLD, FV: S$0.29] which is more exposed to the CPO sector may move more in tandem with CPO prices, its stock is currently trading at 0.72x forward P/B, close to the +1 s.d level over the past five years.

In comparison, Wilmar [HOLD, FV: S$3.44] is trading at 0.93x P/B, close to its five-year historical mean. A proposed spin-off of its China business operations would also unlock value and inject more transparency to valuations.

We maintain NEUTRAL in the soft commodities sector.

Source: OCBC

[winston]

Plantation – Malaysia

Mar 19: Inventory At Below 3.0m Tonnes, The Lowest Since Nov 18

Palm oil stockpile dropped to 2.92m tonnes, a 5-month low since Nov 18.

This is largely due to stronger exports and domestic consumption despite higher CPO production.

Inventory levels might decline further in Apr 19, supported by higher export demand along with the upcoming Hari Raya Puasa in Jun 19 as well as lower production.

Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 258507ee67

[winston]

China injects RM3.7bil palm oil deal, more to come

Revealing this, China’s ambassador to Malaysia Bai Tian said the republic was going a step further by also eyeing bilateral offset deals that involve defence, aerospace, security, maritime, construction and financial services.

Last month’s injection of US$890 million (about RM3.69 billion) into Malaysia’s economy by purchasing 1.6 million tonnes of palm oil was a starter.

That latest deal was struck on March 4 and it increased the palm oil sale to China by 500,000 tonnes.

Last year, Malaysia exported 3.07 million tonnes of palm oil and palm products with a total value of RM8.38 billion to China. This was 7.3 per cent more than 2.86 million tonnes of palm oil sold at RM9.39 billion in 2017.

China was also looking at upstream and downstream industries related to palm oil, including engaging in offset packages via barter trade.

These include the value-added products like oleo chemicals, pharmaceuticals, processed food, specialty and consumer products,

“There is great demand back home for the product as it is ideal for consumption for nearly 400 million of our total population of 1.4 billion,” he said.

China was the world’s biggest buyer of Malaysian palm oil and related products.

Last year, the export of Malaysian palm biodiesel to China increased significantly from 140 tonnes (RM5.0 million) to 41,450 tonnes (RM113 million) from 2017.

However, China stood at number three after Europe and India, just for palm oil purchases alone from Malaysia.

Mohamad Sabu is attempting to engage in billion-dollar trade-offs with Russia, on defence and security procurement, including military aircraft, armaments and software, to spur palm oil sales via transfer of technology and job spin-offs.

Teresa Kok revealed that several other countries from Africa, the Middle East, Europe and Asia have also expressed interest in offset deals involving Malaysian palm oil.

Source: New Straits Times

https://www.nst.com.my/news/nation/2019 ... -more-come

[winston]

Malaysia Unhappy About Europe’s New Palm Oil Rules

In March, the EU announced that it would stop supporting palm oil as a transportation fuel by 2030 because of environmental concerns.

The new EU rules would hurt Malaysia’s palm oil industry, which, it says, makes up six percent of the country’s total economy.

India is the largest market for Malaysia’s palm oil; the EU is second followed by China.

Malaysia is still probably five to 10 years away from buying new, light fighter airplanes. In that time, the new EU rules will more likely show their effects.

Palm oil is used in many products -- from processed foods to soap. The EU rules do not bar the importation of palm oil. Instead, they target using palm oil as a biofuel by making it not count towards requirements for using renewable energy.

Source: VOA

https://learningenglish.voanews.com/a/m ... 76099.html

[winston]

not vested

Sept 16, 2019

Why always me? There is no gold rush here

Oil palm investments are no longer attractive

Unlike the golden years of 2008-12 that attracted enormous investments into new oil palm planting, the industry is no longer attractive due to low CPO price and rising cost pressures over the years.

Taking IOI Corp (HOLD) as a proxy case study (based on availability of data given its long listing history), it was clear that IOI Corp recorded its lowest profit in 18 years with an operating profit per hectare of just MYR2,713 for FY6/19 (Fig 2).

Such low profitability was last seen in FY6/01.

And as IOI Corp is one of the lowest cost producers in this region, the other notso-efficient growers are likely to be breaking even (before debt servicing) or possibly recording small losses.

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/1 ... e6d9fa.pdf

[winston]

Palm oil jumps to 16-month high as China’s waivers boost soy

KUALA LUMPUR: Palm oil futures surged to their highest level since June last year at RM2,359 a tonne on Wednesday as a Chinese decision to waive retaliatory tariffs on purchases of US soybeans boosted prices of rival soybean oil.

The market is supported by the runup in soyoil futures on the Chicago Board of Trade and the Dalian Commodity Exchange following news that China granted the licences, said Sathia Varqa, owner of Palm Oil Analytics in Singapore.

US soybean and soyoil prices rose overnight after China granted a fresh round of waivers for 10 million tons of American beans.

Exemptions were issued to Chinese state-owned and private crushers as well as multinational processors based in the nation, people familiar with the matter told Bloomberg.

There’s also optimism that biodiesel blending in Malaysia and Indonesia will increase, starting next year, said Rajesh Modi, a trader at Sprint Exim Pte in Singapore.

Primary Industries Minister Teresa Kok said on Tuesday that implementation of the 20% biodiesel blending mandate in Malaysia will boost local consumption of palm-biofuel to 1.3 million tons a year.

The market is getting help too from data showing palm exports to China from Malaysia, the second-biggest producer, surged about 42% from a month earlier to 164,838 tons in the first 20 days of October, according to estimates by independent cargo surveyor SGS Malaysia Sdn Bhd.

China could potentially buy more palm oil from Malaysia if prices fall due to trade frictions between India and the Southeast Asian nation, Oscar Tjakra, senior analyst for grains and oilseeds at Rabobank, said on Tuesday.

Traders and investors remained cautious as an influential Indian processors’ group has asked members to refrain from buying from Malaysia because of critical comments by Prime Minister Tun Dr Mahathir Mohamad over Kashmir.

Source: Bloomberg

https://www.thestar.com.my/business/bus ... 6WIzBHY.99

[winston]

Plantation – Malaysia
In The Limelight Again

Although we see a V-shaped recovery in CPO prices, the plantation index has declined by 7% ytd.

Rising CPO price may bring about trading opportunities for investors that would like to ride on this rally, but do take note that earnings growth may not be as great as CPO price recovery due to rising costs, while production may come below expectations due to labour shortage.

We are expecting sector earnings to grow 13% yoy in 2021 vs >100% yoy in 2020.

Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... edf620968d

[winston]

Plantation – Regional
La Nina Impact On Prices Could Be Short-lived

Not all La Nina events would lead to higher palm oil prices.

Based on the last 4 La Nina events, only 2 spurred an increase in soybean oil and palm oil prices.

La Nina’s impact on prices would be dependent on:-
a) the damage to soybean crops;
b) soybean oil’s stock-to-usage ratio;
c) palm oil supply-demand dynamics and
d) major global demand disruptions.

The current La Nina event may not have a significant impact on palm oil prices as demand is still weak while production is expected to see accelerated growth.

Source: UOBKH

https://research.uobkayhian.com/content ... 41abb5f8dd
Maintain MARKET WEIGHT