But analysts expect no big jump due to weather
PETALING
JAYA: Malaysia’s October crude palm oil (CPO) production will see an
increase despite the bad weather that has inundated the northern
peninsula states in recent weeks.
However, according to analysts,
the increase in production would not be as strong as what was seen a
year ago due to weather conditions.
“I still think production for
October will increase but it’ll not be a big jump as workers are just
beginning to come back to the plantations following the Aidil Fitri
holidays,” Singapore-based DBS Vickers Research analyst Ben Santoso told
StarBiz.
ECM Libra Investment Bank Bhd research head
Bernard Ching said in a report dated Nov 1 that production outlook for
the rest of the year was not likely to overtake that of 2009
significantly given unfavourable weather this year although it was
likely to come in strong for October.
The Malaysian Palm Oil Board is expected to release October’s production, inventory and export data tomorrow.
In
September, production fell 2.7% to 1.56 million tonnes compared with
August while stockpiles were 0.2% higher. Inventories of edible oil rose
to 1.70 million tonnes and exports rose 21.2% to 1.46 million tonnes.
Oil palm production in September was lower than August but the October figures are expected to increase. Santoso
said production would still lag behind inventories while Ching said
stock levels might not reach safe levels of more than 2 milion tonnes to
take the industry through the year-end festive season and the oncoming
production down cycle.
“I estimate inventories to be around 2
million tonnes while, for the near term, CPO prices should stay around
RM3,000 a tonne given sentiments so there will be no big change,”
Santoso said.
For the first quarter of next year, he expects
prices to be RM3,000 to RM3,500 per tonne which should be reflective of
Malaysian yields in January and February.
Santoso said prices
would be supported by lower output for 2010 given the drought conditions
earlier in the year and the lower incoming soybean crop from Latin
America.
He said given the lack of near-term catalysts following
the Deepavali festivities, demand for palm oil would pick up again in
December when shipments for the Chinese New Year festivities began.
Ching
said demand for soybean from China, which has to-date taken up the
equivalent of 94% of last year’s imports, would be a key driver for CPO
besides local fundamental drivers.
“Already, soybean prices
surged 17.1% during the month (September) on concerns of tightening
supplies,” he said, adding that soybean prices had room to run and so
would CPO prices.
Meanwhile, Bloomberg reported that
global prices of soybean and palm oil were likely to extend their
advance on demand from China and as investors bought into commodities to
protect their wealth.
Godrej International Ltd director Dorab
Mistry said in a prepared speech at a conference over the weekend that
palm oil might see gains of more than 3% in the next few weeks to
RM3,300 per tonne.
CPO for January delivery rose 4.7% to RM3,341,
which was the highest ever in intraday trade since July 18, 2008 in
mid-morning trade yesterday before settling RM82 higher at RM3,273 per
tonne.
