SINCE peaking at an all-time high of 8,782.59 points on March 3, the Bursa Malaysia Plantation Index is currently trading at 8,072.45 or having dipped 8.1% at the time of writing with four plantation stocks currently occupying the top 10 losers’ list.
The notable stocks are Sarawak Oil Palm Bhd which shed 30 sen or 4.88% to RM5.85, BLD Plantation Bhd (down 35 sen or 3.74% to RM9), Genting Plantations Bhd (down 32 sen or 3.6% to RM8.56) and Ta Ann Holdings Bhd (down 26 sen or 4.91% to RM5.04).
As pointed out by CGS-CIMB Research, while speakers at the recent 33rd Palm and Lauric Oils Price Outlook Conference (POC) 2022 were generally bullish on near-term crude palm oil (CPO) prices, they were less optimistic on 2H 2022F due to demand destruction.
“Nine speakers at the conference predicted that the CPO price will trade between RM4,000 and RM9,427/metric tonne (MT) in 2022F,” noted head of research Ivy NG Lee Fang in a recent ASEAN agribusiness update.
“We deduced the mean to be around RM5,836/MT. This is 32% higher than the 2021 average CPO price of RM4,407/MT. However, this is 22% lower than the spot CPO price of RM7,511/MT as of March 10.”
Among the expert speakers, Dorab Mistry of Godrej International and Rasheed JanMohammed of the Westbury Group were the most bearish on CPO price prospects in 2H 2022F while Dr James Fry of LMC International and Togar Sitanggang of GAPKI were the most bullish on the price outlook for 2022F.
“All speakers concurred that edible oil supplies are currently very tight, so prices could stay firm until 2Q 2022,” stressed CGS-CIMB Research.
“However, there were divergent views on the outlook for 2H 2022F with some expecting prices to stay high as the supply response from farmers could be slow due to competition with other crops for acreage and fertiliser shortages while others expect a pick-up in palm oil production and demand destruction to bring down CPO prices.”
All-in-all, the research house expects the price-making factors for CPO prices for the rest of 2022F to be:
- Duration of the Russia-Ukraine conflict and how soon can the Black Sea regions resume their exports of sunflower seed and sun oils;
- Indonesia’s Domestic Market Obligation (DMO) policy and its impact on palm oil exports;
- Labour shortage situation at Malaysia estates;
- Weather developments in North America and Canada;
- Farmers’ planting decisions;
- Crude oil price, global liquidity and economic growth; and
- Changes in government policies on import duties and export taxes as well as biodiesel mandates that could impact the demand for edible oils.
“There is upside to our current average CPO price forecast of RM4,100/MT for 2022F as we have not reflected the Russia-Ukraine war and the latest DMO policies in our predictions,” contended CGS-CIMB Research.
“Upstream palm oil producers that sell CPO on spot basis will benefit from the current CPO price upswing.” – March 14, 2022
