Wednesday, July 13, 2011

Plantations down in late morning on bearish outlook

KUALA LUMPUR: PLANTATION []s were among the decliners in late morning trade on Wednesday, July 13 on bearish outlook for crude palm oil futures.

At 11.07am, the FBM KLCI was down 1.48 points to 1,576.62. Turnover was 269.42 million shares valued at RM350.04 million. There were 223 gainers, 227 losers and 253 stocks unchanged.

Batu Kawan fell 12 sen to RM16.80 while Genting Plantations and Kuala Lumpur Kepong declined 10 sen each to RM7.84 and RM22.14.

RHB Research said on Tuesday the steep recovery in CPO production levels has resulted in CPO prices continuing on its downward trend, falling another 6.8% on-month to current levels of RM3,053 a tonne, from last month's average of RM3,275 a tonne.

It has also led Oil World to raise its global CPO production estimates for Oct/Sept 11 to 48.2 million tonnes (up 0.4% from previous estimates), which implies a 4.6% on-year increase (from 4.1% previously).

As a result of the revised projections, global stock/usage ratio for 2011 is now projected at 16.3% (from 15.7% previously), up from 15.3% in 2010.

Based on these projections, Oil World now expects CPO prices to fall to about US$900-US$950/tonne (RM2,700-RM2,850/tonne) in the October-December 2011 quarter.

'With CPO prices already currently at RM3,000-RM3,100/tonne, we think it is not too big a stretch for prices to fall to the levels projected by Oil World and this would put average prices for CY2011 very much in line with our RM3,100/tonne average price projection,' it said.

Oil World has also released its projections for 2012, expecting global CPO production to rise by another 5.7% on-year to 51 million tonnes, and global consumption to rise by 6.1% on-year. This would result in global stock/usage ratio for CPO to remain relatively flat in 2012, at 16.3%.

'With this projection, Oil World expects CPO prices for 2012 to be about 9% lower on-year at about US$1,000 a tonne (RM3,000 a tonne), which is just slightly above our RM2,900 a tonne assumption for CY2012,' it said.

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