PETALING JAYA: Plantation owners are unlikely to suffer should the price of crude palm oil (CPO) fall to around RM2,000 per tonne. A palm oil trader said that with costs currently ranging from RM1,200 to RM1,500 per tonne, plantations would still enjoy relatively good margins if that were to happen. “That is still a good margin as the price of other edible oil grains, such as soybean, is also soft.
“But the (CPO) market is holding up well, I reckon it will hold at RM2,000 per tonne,” he said. Most analysts at present continue to predict a downtrend in prices in the medium term, despite the rebound last week. CPO prices had been on a downtrend since the middle of last month from a six-month high of RM2,789 on May 13 to RM2,157 last Monday, but had gone up over the week to end at RM2,319 per tonne on Friday. Analysts’ bearishness on CPO prices is mainly due to expected weaker demand as the World Bank has declared a deepening global recession, but plantation owners should still enjoy strong margins even at RM2,000 per tonne.
The World Bank had on June 22 projected a 2.9% fall in the world economy this year and a decline in investments to developing countries. Another palm oil trader based in Kuala Lumpur said CPO prices would depend on the Indian monsoon.
“A successful planting depends on the Indian monsoon in the next two to three weeks. “At the moment, the monsoon remains at the coastal area and if it doesn’t move inland then they can’t plant – because you need water for planting,” he said. News reports put the monsoon rains between June and September as below normal by as much as 45% in the first two weeks of June. Hwang DBS Vickers Research said in a report on Friday: “This could lead to lower domestic production of oilseeds and put upward price pressures domestically (in India).” At the same time the broker noted that India’s Solvent Extractors’ Association had requested the government to put back import duties on soybean oil to 25% and palm oil to 20% from zero currently. “Should the Indian government decide to act on the request, we believe this would be a catalyst for CPO prices to weaken again,” it said. However, the broker added that in light of the lower-than-normal monsoon rainfall, imposing an import duty would be counter intuitive and unnecessarily put up a supply barrier. “We believe the Indian government is unlikely to pursue an increase in import duties on soybean and palm oil.
“Any uncertainties, however, may put pressure on palm oil prices in the near term,” it said. Hwang DBS forecasts CPO to trade between RM2,000 and RM2,500 for the remainder of the year and maintains its estimate of an average price of RM2,300 per tonne in 2009 and 2010. Source : The Star by Loong Tse Min]]>