Uncertain Year For Palm Oil

CPO price forecasts for this year range from RM2,250 to RM4,100

PETALING JAYA: Divergent views on crude palm oil (CPO) price forecasts ranging from RM2,250 to RM4,100 per tonne this year, amid uncertainties in crude oil prices and changes in biodiesel mandates, will compel planters to be more vigilant in their operations.

The average CPO price forecast made at the recently concluded Palm and Lauric Oils Conference 2011 (POC 2011) of RM3,100 per tonne bodes well for many local oil palm firms to continue gaining reasonable profits, said United Malacca Bhd chief executive officer Dr Leong Tat Thim.

The cost of production for peninsula oil palm planters is said to be about RM1,200 a tonne, while for those in Sabah and Sawarak it is about RM1,300RM1,400 and RM1,400RM2,000 respectively.

“One challenge basically is to continue paying windfall profit tax (WPT) by Sarawak planters who still have yet to get good harvest given their young palm trees with low yields,” said a Sarawak-based planter on the sidelines of POC 2011.

“We also have to fork out extra investments from planting on peatland and infrastructure works,” the planter said.

Malaysian Estate Owners Association president Boon Weng Siew, meanwhile, said the price forecasts at POC 2011 were still bullish despite some experts predicting the CPO would hit a low of RM2,250 to RM2,500 per tonne in the second half of this year due to the recovery in production among major producers.

“Personally I think if CPO manages to stay above RM2,500 per tonne it will be good for our planters,” Boon said. “They will have nothing to worry about for the rest of the year.”

United Plantations Bhd executive director (communications) Datuk Carl Bek-Nielsen, however, expressed concern over the local plantation industry’s slow reaction to the danger of stagnant productivity in the face of rising labour costs.

He is also concerned about the threat of changing biodiesel mandates by legislators, particularly in Europe, as well as the new technology coming onstream in the next three to five years, in terms of making “celulosic ethanol” which is much more cost effective, thus affecting the high price cycle and pushing prices down.

Malaysia’s palm oil production, which stood at 17.6 million tonnes in 2009, fell to 16.9 million tonnes last year.

United Malacca’s Leong shared the concern over Malaysia’s lower production. He wants to see the Malaysian Palm Oil Board (MPOB) and big plantation companies undertaking more genetic engineering research to possibly find a breakthrough for doubling the local oil palm yields.

UOBKayHian in its plantation sector report yesterday said the key message at POC 2011 was that this year would be more volatile than 2010. The differing price expectation is due to the uncertain geopolitics and crude oil prices and soybean oil price premium to palm olein widening due to higher palm oil supply and biodiesel.

The key challenges for local planters include labour shortage leading to reduced productivity, potential demand rationing from countries sensitive to high prices, and green campaigns against producers and users.

In another development, MPOB yesterday reported higher palm oil output and stocks but lower exports for February.

Palm oil stocks rose 4.2% to 1.48 million tonnes while production was 3.5% higher at 1.09 million. Exports, however, fell to 1.11 million tonnes, the lowest since February 2008.

On Bursa Malaysia Derivatives yesterday, the CPO May futures contract lost RM126 to RM3,459 per tonne amid forecasts of recovery in CPO production and stocks in the second half of this year.

Source: The Star by Hanim Adnan

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