Do You Know Where You Are Going To CPO?

On Business Times, Aug 21st 2009

• CPO prices set to increase amid rising global demand
  
  By Zaidi Isham Ismail Published: 2009/08/21
  
  CRUDE palm oil (CPO) prices are expected to rise by a quarter and hit RM3,000 a tonne in the next six months, due to global demand outpacing dwindling supply and stockpile.
  
  Other factors include a poor Argentinian soyabean harvest, limited edible oils in India and a lower national CPO production.
  
  CPO is trading at around RM2,400 now.
  
  Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron said all signs point towards a firmer CPO price in the next six months. This includes a depleting national stockpile of 1.3 million tonnes from 2 million tonnes last year and the El Nino.
  
  "CPO production is also expected to be lower at about 17.3 million tonnes compared with last year's 17.7 million tonnes due to the hot weather.
  
  "So global demand will be more compared to supply and will favour CPO prices," Yusof told reporters in Kuala Lumpur yesterday on the sidelines of Perdana Leadership Foundation's Industry Insights seminar.
  
  He said the Argentina soyabean harvest is also not expected to do well. India, the world's largest edible oils buyer, is also facing limited supply.
  
  Yusof said demand has been good from China, the European Union as well as the US. In fact, demand from the US has climbed to over one million tonnes a year compared with a few thousand tonnes during the palm oil smear campaigns in the 1980s.

On Star Business. Supply concern may lift CPO to RM3,000

• Friday August 21, 2009
  
  Supply concern may lift CPO to RM3,000
  
  Council: Demand for palm oil continues to remain strong
  
  CRUDE palm oil (CPO) prices are likely to hit RM3,000 per tonne over the next six months due to global supply concern.
  
  Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron said demand for palm oil continued to be strong but supply would be tight.
  
  “It’s the supply versus demand mechanism. CPO prices will follow its own cycle,” he said.
  
  Yusof said India was experiencing a shortage in supply while Argentina and Malaysia were expected to produce less palm oil. CPO price was up RM2 to RM2,301 yesterday.
  
  “Malaysia is projected to produce 17.2 million to 17.3 million tonnes of palm oil this year. Last year, the country produced 17.68 million tonnes,” he said, adding that Sabah would be badly affected this year.
  
  Malaysia is currently the number two palm oil producer, with 41% share of the world’s palm oil production, and a leading exporter, with 47% share of the world’s exports.
  
  Malaysia, Indonesia and Argentina are major net exporters of oils and fats.
  
  Yusof said the palm oil industry was fairly recession-proof as prices recovered quickly.
  
  He said the strong demand trends favouring palm oil would sustain profits.
  
  “For example, if producers would like to maintain a margin of 40%, with the current cost of production of RM1,300, the price of CPO should be maintained at RM2,167.
  
  “Similarly, if the cost of production is RM1,300 and the current price is only RM1,600, then producers can only expect a margin of 20% to 25%,” he said.
  
  Kuala Lumpur Kepong Bhd chief executive officer Datuk Seri Lee Oi Hian believed that CPO prices would hit RM2,500 next year.
  
  He said increased cost of production and stagnating yields were some of the challenges the industry was facing.
  
  Lee said CPO production cost had gone up 2% per tonne in the first half of this year but did not disclose the cost.
  
  At the same time, the industry had to deal with high labour content and heavy dependence on foreign labour, he added.
  
  Sime Darby Technology Centre Sdn Bhd senior vice-president II and Quantum Leap R&D head K. Harikrishna said historical data showed that demand for palm oil as a food product had always risen despite peaks and troughs in economic cycles.
  
  “CPO price cycles have been influenced by supply and demand dynamics impacted by economic conditions. However, Malaysian palm export data has shown a historical uptrend.
  “As a food necessity, palm oil has always been on increasing demand trend due to the world’s population growth,” he added.
  
  Harikrishna said Sime Darby’s CPO production made up about 5.6% of the world’s palm oil production.
  
  He said due to limited land bank for expansion opportunities in Malaysia, revolutionary research and development efforts were vital to boost palm oil yields.

How did the CPO fared since?

On Business Times today. Palm oil drops to near 6-week low amid output caution

• Palm oil drops to near 6-week low amid output caution
  
  Published: 2009/09/08
  
  MALAYSIAN crude palm oil futures dropped 3.1 per cent to the lowest level in nearly six weeks yesterday, extending a losing streak to five straight sessions amid worries over rising output, traders said.
  
  Improved rainfall in palm-growing areas raised the prospect of higher output, setting a negative tone for prices, which have come under pressure after cargo surveyors reported last week that Malaysia August exports dropped to about 1.3 million tonnes from 1.4 shipped in July.
  
  "There is no more weather factor," said a trader with a Kuala Lumpur-based commodities bro-kerage, adding that bearish external markets and poor export numbers may bring down the palm price to its next support level of RM2,060.
  
  Another Malaysian trader said the market also took its cue from weakness on China's Dalian Commodity Exchange, with the most-active September soyaoil contract falling 5.5 per cent.
  
  Some analysts, however, said palm prices may get support from the return of an El Nino drier weather pattern.
  
  Thomas Mielke, head of German oilseeds research group Oilworld, said Malaysian palm oil futures, which often draw strength from the US soyabean market, may be well supported by low stocks of the tropical oil and dry weather hitting yields.
  
  "There are low stocks of palm oil and production has suffered - as a result, world supply of palm oil will show below-average growth in 2009/10," Mielke said at a grains conference in the Philippines.
  
  The benchmark November contract on the Bursa Malaysia Derivative Exchange settled down RM67 at RM2,130 a tonne, a level unseen since July 29. - Reuters

How?

Dejavu yet again?

Have you not seen this happen before? Every time the pros come and gives the utmost bullish outlook, the market turns the other way?

And here is the chart CPO.

ps. here is a very fitting song clip!

Just listen to what the man said!