The View 'Less' Optmistic On Crude Palm Oil Prices

Yes, the best fit news strikes once more.

Firstly, here is how CPO is doing. Taken from Business Times.

• April 2010 fell RM22 to RM2,550 per tonne, May 2010 declined RM30 to RM2,520 per tonne, June 2010 decreased RM39 to RM2,500 and July 2010 fell RM35 to RM2,495

So we have the CPO around the rm2,500 region.

On the Edge Financial daily. IOI Corp sees CPO trading RM2,800 to RM3,000 this year

• KUALA LUMPUR: IOI CORPORATION BHD [] executive chairman Tan Sri Lee Shin Cheng says crude palm oil (CPO) prices can reach RM2,800 to RM3,000 per tonne this year due to strong demand and El-Nino weather phenomenon.
  
  He said on Thursday, April 8 that he expected IOI Group's total CPO output for 2010 to decline by about 8% due to the impact of the El-Nino.
  
  His expectations about the CPO prices were higher than RHB Research Institute's recent forecast issued on April 1. The research house had said the positive basic supply and demand fundamentals would help support CPO prices at a range of RM2,300 to RM2,800 tonne over the short to medium term.
  
  "Although CPO prices could potentially hit the RM3,000 tonne mark again, we believe this may not be a sustainable price target in the medium term, due to the demand reallocation which would occur in price-sensitive markets like China and India which would then 're-balance' prices. In the long-term, we believe CPO prices would stay above RM2,000/tonne due to structural changes," RHB Research said.

Here's the Business Times version.

• IOI Corp Bhd (1961)anticipates palm oil prices to hit RM2,800 to RM3,000 a tonne in the next few months as it braces for lower output.
  
  As one of the most efficient planters and biggest palm oil producers in the country, IOI's price forecast is highly awaited by vegetable oil traders and analysts around the world.
  
  IOI executive chairman Tan Sri Lee Shin Cheng said that he expected the group's current-year palm oil output to fall as much as 8 per cent to around 715,000 tonnes.
  
  In the last financial year ended June 30 2009, IOI managed to squeeze 777,310 tonnes of palm oil from its 80-odd estates.
  
  "I still hold the forecast at between RM2,800 and RM3,000 per tonne because of localised weather phenomenon like El Nino that affects output. There's also the labour shortage issue - workers come and go," Lee told reporters on the sidelines of the official opening of Hong Leong Bank's branch in Bandar Puteri Puchong, Selangor, yesterday.
  
  At an economic conference two months ago, when palm oil was trading at around RM2,400 a tonne, Lee said he was optimistic of prices trending upward to between RM2,800 and RM3,000 a tonne.
  
  The price did rise to a high of RM2,700 a tonne, but has fallen rapidly in the last four weeks.
  
  When asked why, Lee replied: "The US dollar has weakened against a stronger ringgit and that has dragged palm oil prices (lower) to a certain extent."
  
  According to Bank Negara Malaysia's website, US$1 is at RM3.21 currently, from RM3.45 a month ago.
  
  Lee does not expect the palm oil price to continue falling.
  
  "Demand for palm oil is very strong all around the world, especially traditional markets. Palm oil is the best vegetable oil in the world. It is nutritious and far more flexible in its applications," he said.
  
  Yesterday, third-month benchmark crude palm oil on the Bursa Malaysia Derivatives market traded RM39 lower to close at RM2,500 a tonne.

I hold no grudges against the forecast made.

However, the forecast made was between 2800 and 3000.

Why use the high end of the projection?

And why the word SOON?

LOL! yeah how soon is soon?

Here is Star Business version: IOI sees 8% drop in palm oil output due to weather LOL!

• PUCHONG: IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng projects the group’s palm oil output may drop 8% this year as unusual weather patterns and labour woes affect production at some estates.
  
  Last year, fresh fruit bunches (FFB) production at IOI Corp’s estates stood at an estimated 3.6 million tonnes. Based on an extraction rate of slightly above 21%, the group’s crude palm oil (CPO) production amounted to about 770,000 tonnes.
  
  The drier-than-usual weather due to El Nino and shortage of plantation workers were “very localised” issues, Lee told reporters after attending Hong Leong Bank Bhd’s new branch official opening yesterday.
  
  On March 31, plantation giant Sime Darby Bhd had projected that its palm oil production would drop 7% this year due to freak weather.
  
  Weaker production and strong demand will continue to support prices going forward, and Lee is sticking to his previous forecast of between RM2,800 and RM3,000 a tonne of CPO for the year.
  
  He said the current weakness in the CPO futures market was a reflection of the ringgit’s strength against the US dollar.
  
  CPO futures on Bursa Derivatives hovered at above RM2,500 a tonne yesterday. The benchmark third-month contract had dropped 5.8% year-to-date.
  
  MIDF Research analyst Syed Muhammed Kifni observed that crude oil futures in New York had gained 4.7% during the same period.
  
  “If you look at the market trend in the previous year, CPO prices usually move in line with crude oil prices,” he said.
  
  What changed this year was the ringgit’s sharp advance, up 6.6% against the US dollar since the start of the year.
  
  This means that while companies like IOI Corp may sell their products for the same price in US dollars, they would earn less in ringgit given the unfavourable conversion rate.
  
  Meanwhile, a poll by Reuters yesterday predicted palm oil stockpiles in the country may drop to a six-month low in March, as exports and domestic consumption rose faster than a rebound in production.
  
  The Malaysian Palm Oil Board (MPOB) is due to release its latest monthly industry data on Monday.
  
  Earlier this month, MPOB warned that palm oil production in the country might miss its 18.1 million tonnes target this year due to labour shortages, even as yields recovered.