Malaysia — Crude palm oil (CPO) is expected to trade near the RM4,000 per tonne mark within the next few weeks as fear over vegetable oils supply tightness escalates following strikes in Indonesia and Argentina.
In Argentina, farmers are set to revive a three-week strike against a tax hike in soyoil exports that was called off last week if the government fails to meet their demands.
Meanwhile, port workers in Indonesia are planning a major strike after Parliament passed legislation on Tuesday ending a state monopoly on operation of the country’s ports.
A trader told StarBiz that CPO was heading for a run-up in the next two weeks based on the latest developments in Indonesia and Argentina, the world’s largest producer of palm oil and soybean respectively.
China is also importing more palm oil in the second quarter following its traditional low purchase season in the first quarter.
CPO, after hitting an all-time high of RM4,486 per tonne last month, dropped about 30% in a sell-off early this month.
Yesterday, CPO futures on Bursa Derivatives closed lower with the benchmark June contract down RM50 to RM3,325 per tonne.The trader said CPO was expected to trade above RM3,000 per tonne in 2008 and 2009, as Malaysia and Indonesia were set to face worse haze threats due to a we akening La Nina this year.
Drier periods are expected with the possibility of more hot spots in the world’s two largest palm oil producing countries.
The effects of haze are often felt six or 12 months later, which could lead to lower palm oil yield and reduced output.
AmResearch in its latest sector update said: If the haze occurs this year, CPO production in 2009 will decline, thus further boosting CPO prices.
The haze in 2006 resulted in CPO production declining to 15.8 million tonnes in 2007 from 15.9 million tonnes in 2006.
For 2008, industry experts have forecast Malaysia’s CPO production to range from 16.2 million to 17.3 million tonnes, and Indonesia’s output at 18.4 million to 19.8 million tonnes.
AmResearch, which has an overweight on the sector, has buy calls on IOI Corp Bhd and Kuala Lumpur Kepong Bhd.
It also likes smaller cap plantations like Sarawak Oil Palms Bhd and TH Plantations Bhd as well as Singapore-listed Wilmar International Ltd and Indofood Agri Resources Ltd.