Homepage
PR Newswire
16-05-2015, 11:35 PM
New Straits Times (Malaysia), May 14, 2015 Thursday
`El Nino to lift CPO prices'
KUALA LUMPUR: PALM oil prices may rise at a feverish pace should an El Nino weather pattern spur drought across Southeast Asia, drying up palm oil output across Indonesia, Malaysia and southern Thailand.
On Monday, the Australian Bureau of Meteorology announced a substantial El Nino weather phenomenon for 2015. Japan weathermen said while the thresholds were not met until now, they expect a significant event this year.
Incidentally, the Bursa Malaysia derivatives market has started to "heat up" with the third-month benchmark crude palm oil (CPO) futures hitting a high of RM2,225 per tonne a couple of days ago. Yesterday, palm oil futures slid RM27 to close at RM2,198 per tonne.
In an interview with Business Times, Malaysian Estate Owners Association (MEOA) president Joseph Tek Choon Yee recalled there were many El Nino forecasts a year ago but somehow it did not happen.
In March 2014, palm oil prices reached a high of RM2,922 per tonne in anticipation of an El Nino phenomenon.
As the threat dissipated, prices plunged to a low of RM1,943 per tonne in September before recovering to RM2,250 per tonne in December.
By mid-February 2015, Tek noted many MEOA members in Sabah started to experience bone-dry episodes at their estates.
CIMB Investment Bank senior analyst Ivy Ng said lower rainfall and soil moisture levels can hurt yields after a lag, with the effects of dry weather typically felt 10 to 12 months or 22 to 24 months later.
A moderate El Nino, combined with a strong execution of a biodiesel mandate in Indonesia, could benefit prices towards the end of 2015. In the near term, gains may be limited on seasonally high supply and reserves, she said in her notes to investors.
Explaining the impact of El Nino on plam oil trees, Tek said: "We will see an immediate delay in ripening of bunches and dangers of fire hazards in estates.
"A half-year lag effect will see some bunch failures and lower crop production. The second lag effect of flower abortion will ensue a year later with even lower crop output," he said.
"And a final two-year lag effect will see drastic slash in crop harvests due to the palms sprouting more male flowers. Only female flowers can eventually form into bunches," Tek added.
Asked if Malaysia is still able to harvest 20 million tonnes of oil this year, he said it depends on the severity of moisture stress.
Tek cautioned weather prospect is just one of the many factors determining price. Competing edible oils, crude mineral oil, inventory level and policies can also impact prices.
"As at end-April, Malaysia's CPO stock surpassed two million tonnes, following a stronger output set against weaker exports. However, there were probably delays in CPO exports in order to derive benefit from zero export tax starting next month," he said.
"With Ramadan around the corner and Indonesia pushing ahead with its biodiesel programme, I want to believe this time around in the wake of an El Nino, there will be an upward push in prices."
When pressed for a forecast, Tek replied, "Let's hope it can trade up between RM2,300 and RM2,400 per tonne".
( END )
`El Nino to lift CPO prices'
KUALA LUMPUR: PALM oil prices may rise at a feverish pace should an El Nino weather pattern spur drought across Southeast Asia, drying up palm oil output across Indonesia, Malaysia and southern Thailand.
On Monday, the Australian Bureau of Meteorology announced a substantial El Nino weather phenomenon for 2015. Japan weathermen said while the thresholds were not met until now, they expect a significant event this year.
Incidentally, the Bursa Malaysia derivatives market has started to "heat up" with the third-month benchmark crude palm oil (CPO) futures hitting a high of RM2,225 per tonne a couple of days ago. Yesterday, palm oil futures slid RM27 to close at RM2,198 per tonne.
In an interview with Business Times, Malaysian Estate Owners Association (MEOA) president Joseph Tek Choon Yee recalled there were many El Nino forecasts a year ago but somehow it did not happen.
In March 2014, palm oil prices reached a high of RM2,922 per tonne in anticipation of an El Nino phenomenon.
As the threat dissipated, prices plunged to a low of RM1,943 per tonne in September before recovering to RM2,250 per tonne in December.
By mid-February 2015, Tek noted many MEOA members in Sabah started to experience bone-dry episodes at their estates.
CIMB Investment Bank senior analyst Ivy Ng said lower rainfall and soil moisture levels can hurt yields after a lag, with the effects of dry weather typically felt 10 to 12 months or 22 to 24 months later.
A moderate El Nino, combined with a strong execution of a biodiesel mandate in Indonesia, could benefit prices towards the end of 2015. In the near term, gains may be limited on seasonally high supply and reserves, she said in her notes to investors.
Explaining the impact of El Nino on plam oil trees, Tek said: "We will see an immediate delay in ripening of bunches and dangers of fire hazards in estates.
"A half-year lag effect will see some bunch failures and lower crop production. The second lag effect of flower abortion will ensue a year later with even lower crop output," he said.
"And a final two-year lag effect will see drastic slash in crop harvests due to the palms sprouting more male flowers. Only female flowers can eventually form into bunches," Tek added.
Asked if Malaysia is still able to harvest 20 million tonnes of oil this year, he said it depends on the severity of moisture stress.
Tek cautioned weather prospect is just one of the many factors determining price. Competing edible oils, crude mineral oil, inventory level and policies can also impact prices.
"As at end-April, Malaysia's CPO stock surpassed two million tonnes, following a stronger output set against weaker exports. However, there were probably delays in CPO exports in order to derive benefit from zero export tax starting next month," he said.
"With Ramadan around the corner and Indonesia pushing ahead with its biodiesel programme, I want to believe this time around in the wake of an El Nino, there will be an upward push in prices."
When pressed for a forecast, Tek replied, "Let's hope it can trade up between RM2,300 and RM2,400 per tonne".
( END )
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]