Thursday, August 5, 2010


By Wan Nor Azura Mior Abd Aziz

KUALA LUMPUR, Aug 5 (Bernama)-- The crude palm oil (cpo) market is expected
to remain stable until next year with prices hovering around RM2,650 per tonne
due to supply constraints brought on by the El Nino phenomenon and its
propensity to follow prices of competing oils, said an analyst with a domestic
research house.
"While the recent El Nino phenomenon was comparatively mild, it may be
enough to impede the growth of palm flowers which takes six months to mature and
produce fresh fruit bunches (FFB).
"Hence the impact to palm oil yield may be felt during the last-quarter of
the year, Syed Muhammed Kifni Syed Kamaruddin, a senior analyst with MIDF
Research told Bernama today.
CPO prices have been holding up quite well so far this year despite the
bumper South American soybean harvest.
"Hitherto, strong demand and tight global edible oil inventories, with
stock/usage ratio falling to multi-year lows, are providing support to edible
oils prices in general," he said.
From January and July, CPO prices were range-bounded hovering between
RM2,300 to RM2,700 per metric tonne.
"We also expect CPO prices to encounter immediate resistance at around the
RM2,600 per metric tonne level and consolidate thereafter in the near-term.
"CPO price movements have been, and will, likely continue to be influenced
by the general trend in major commodities particularly crude oil and soybean
oil, Syed Muhammed Kifni added.
He also said the sustainable way for the palm oil industry in Malaysia was
to continue expanding output by improving yields.
Continued expansion of plantation acreage is being limited by the scarcity
of land available and suitable for oil palm plantations.
The average FFB per hectare and the average oil extraction rate (OER) of oil
palm plantations in Malaysia have stagnated around 20 metric tonnes per hectare
and 20 per cent, respectively, in the past decade.
Various research efforts have been undertaken by both private and government
entities to enhance the yields of oil palm tree, however, the results so far has
been rather evolutionary rather than revolutionary.
Nevertheless, efforts are ongoing and some major plantation companies such
as Sime Darby Bhd and Genting Plantations Bhd have embarked on cutting-edge
genome research which hopefully may provide the industry with ground-breaking
solutions to its long-term growth conundrum.
Meanwhile, Head of Research, ECMLibra Investment, Bernard Ching said the
industry expected range bound trading over August with some negative bias
from rising production and bearish soybean news.
In July, CPO futures rebounded slightly and closed the month 7 per cent
Early this year, the El Nino was on everyone lips but of late this has
switched to the La Nina.
"We believe it is too early to tell if the current La Nina spell will pose
significant threats to production," he said.
Ching also said there was not much to be excited about in the near-term for
CPO prices.
With prices hovering between RM2300-2700, companies at this level would
still be very profitable, he said, adding that in the mid-to-longer-term, the
key driver would be weather related events that might interrupt production.
Over the long-term, palm oil consumption can only increase hence prospects
are good for the industry to expand further.
"The only problem is the scarcity of suitable land that could dampen
growth," Ching added.