by Yong Min Wei
KUALA LUMPUR: Crude palm oil (CPO) futures continued to slide yesterday in line with the fallout of commodities’ prices stemming from a slowing global economy that is reducing demand for crude oil.
At the close yesterday, CPO deliveries for September and October 2008 dropped RM110 each to settle at RM2,564 per tonne and RM2,561 per tonne, respectively. November delivery fell RM105 to RM2,565 per tonne.
Most plantation stocks on Bursa Malaysia took a dip yesterday as CPO futures continued to fall, with the plantation index sliding another 2.14% or 124.11 points to 5,671.91.
Kuala Lumpur Kepong Bhd fell 30 sen to RM11.70 and Asiatic Development Bhd shed 25 sen to RM5.90. Tradewinds Plantation Bhd and IJM Plantations Bhd dropped 15 sen and 13 sen to close at RM2.76 and RM2.69, respectively. IOI Corp Bhd fell 12 sen to RM4.82.
Hap Seng Plantations Holdings Bhd shed five sen to RM2.55 but Sime Darby Bhd instead rose five sen to close at RM6.95.
Crude oil prices tumbled to a session low of US$112.48 (RM376.81) per barrel, a three-month low, last night but had rebounded as at press time to around US$116. The US dollar, the strength of which is often inversely related to commodities’ prices, fell against the Euro last night for the first time in five days in profit taking activities.
Meanwhile, the Malaysian Palm Oil Board said it was comfortable with CPO prices of between RM2,500 and RM2,800 per tonne this year, said its chairman, Datuk Sabri Ahmad.
He said if the prices were too high, the downstream industries would be affected. “The important thing is not to see the sudden drop in the price. What is important is sustainable price to ensure that we can continue to develop the industry,” he said at the Palm Oil Familiarisation Programme here yesterday.
Sabri said to ensure high productivity, the industry would continue to replant old trees with new high-yielding clones which could give better yields which would result in lower cost of production.
CIMB Research maintained an underweight on the plantation sector as there was no change to its earnings forecasts for all the planters.
In a report yesterday, it said CPO futures continued to trend lower on Monday despite the positive newsflow in the form of the decline in palm oil inventories in July and the strong month-on-month increase in palm oil exports in the first 10 days of this month.
CIMB Research said on a year-to-year basis, output perked up 15% with the help of the recovery of fresh fruit bunches (FFB) yield from the biological tree stress that had sapped yields in the previous year.
Since it downgraded the plantation sector on July 18, 2008, CPO futures had fallen by 22% due to negative developments such as a 13% decline in crude oil price during the same period and improved prospects for edible oil supplies as well as concern over a slowdown in edible oil consumption.
“The unexpected steep and fast drop in CPO price has rattled sentiment in the palm oil market,’’ CIMB Research added.
It said this could lead to forced selling by brokers in the CPO futures market, hence, sending CPO prices below the fundamental-support level.
It pointed out that some palm oil traders may renege on their forward contracts in view of the sharp drop in selling prices, resulting in possible delays in shipments to destination markets.
CIMB Research said CPO prices could rebound in the fourth quarter given the potential setbacks in United States soybean harvest due to earlier weather concerns, stronger demand for palm oil as China buys ahead of Chinese New Year in late January 2009, and seasonal decline in palm oil output towards year-end.
In view of these catalysts, the research house retained for now its CPO price forecasts of RM3,350 per tonne for 2008 and RM3,000 per tonne for next year.
Meanwhile, Reuters reported that Pakistan had delayed some palm oil purchases for the Muslim holy month of Ramadan, covering about 75% of its requirements as traders paused to see where plunging prices of vegetable oil stabilised.
Palm oil imports for the July-September period were expected to exceed 375,000 tonnes for Ramadan in early September, Pakistan Edible Oil Refiners Association vice chairman Rasheed Janmohammad told the newswire.
“The only concern is that Pakistan will keep on delaying their purchases until the market stabilises,” he said in a telephone interview.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment