30 November 2006

CPO futures rally to above RM1,800

IOI: CPO futures prices can hit RM2,200 in 3 months

Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives rallied to close above the RM1,800 mark – the highest in about 2½ years – of speculative buying interest buoyed by higher soy bean prices on the Chicago Board of Trade and China market.

Both the January and February CPO contracts closed RM100 higher at RM1,850 and RM1,864 a tonne respectively while spot month November South CPO settled at RM1,815 versus RM1,725 on Friday. “The significant increase in the CPO prices to above RM1,700 over the past two weeks is fundamentally driven by external factors,” a trader said.

“There are growing concerns over whether supply is sufficient, especially when the commodity is sought after for both food and fuel uses.” He expects CPO to trade between RM1,800 and RM1,880 a tonne in the next two weeks, riding on th continued growing demand and potential supply tightening given the unusually heavy rain pattern this year.

Market cargo surveyor Intertek Testing Services said yesterday that exports of Malaysia’s palm oil products in the first 20 days of November fell 14.8% to 834,065 tonnes from 979,224 tonnes last month. Argentina, the world’s second largest corn exporter, announced last Friday that it will suspend new orders for corn exports from Nov 20 to curb rising inflation at home.

“It is not uncommon for importers to switch to CPO should other vegetable oils like corn, soy bean and rapeseed crops register poor harvest due to bad weather or if there are trade restrictions,” a dealer said.

He expects CPO prices to increase further as a result of the latest development in Argentina and continue a strong demand from major buyers of local CPO from China and India. Argentina’s Agriculture Secretary Miguel Campos said the halt on new requests by exporters to sell corn abroad in the coming season would allow the government to audit existing orders for 10.5 million tonnes.

He cited concerns that international demand would limit the domestic corn supply and lead to higher prices for Argentine consumers and livestock producers. Separately, United Plantations Bhd posted a higher net profit of RM49.9mil for the third quarter ended Sept 30, compared with RM38.4mil in the previous corresponding period. Turnover als increased to RM181.6mil from RM154.9mil previously. Pre-tax profit for the quarter rose to RM66.8mil versus RM53.5mil a year ago.

IOI: CPO futures prices can hit RM2,200 in 3 months

IOI Corp Bhd, the world’s biggest publicly traded palm oil producer, says crude palm oil (CPO) futures prices can go as high as RM2,200 per tonne in three months’ time.

“While we think CPO will continue to trade at high prices, thi time is different from 2004. We now have a combination of the biodiesel factor bad weather affecting soyabean producing countries and Argentina bannin corn exports,” IOI Corp executive chairman Tan Sri Lee Shin Cheng said.

“A month ago, when the futures was around RM1,600, I said prices can go as high as RM1,900 per tonne within six months. “By now, the prices have exceeded RM1,900. So my second target is US$600 (RM2,180) per tonne in six months time, or if we’re lucky, within the first quarter of 2007,” he added.

Another reason that is contributing to the sunny forecast lies in the recent rainy weather pattern. Palm oil output is expected to decline in the next few months as frequent rainfalls tend to slow down palm fruit harvesting activities. While other Malaysia palm oil producers are quick to invest into the biodiesel business, IOI Corp remains cautious and conservative. When the time is right, it will dive in a very big way.

“Biodiesel is not a priority for us. We want to see more compulsory usage of biodiesel all over the world,” Lee said. Asked when the group intends to start building its 200,000 tonnes per year biodiesel plant in Tanjung Langsat Johor, he replied, “When we build the biodiesel plants, we’ll do it simultaneously in Europe and Malaysia. It is actually more cost effective to produce and sell biodiesel in consuming countries. We could invest as much as RM1 billion for biodiesel plant capable of churning out a million tonnes a year in Europe,” he said.

Yesterday, IOI Corp shareholders unanimously approved the group’s proposed second exchangeable bond issue worth US$500 million (RM1.8 billion).

Source: oleoline.com Nov. 28, 2006.

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