Affin Research sees firm crude palm oil prices

KUALA LUMPUR: Affin Investment Research expects crude palm oil (CPO) production to continue to trend lower in the next three to four months, thereby cutting inventory to about 1.5 million tonnes and keeping prices firm.

It said on Wednesday this was pending the CPO production forecast for 2014 and the size of the South American soybean harvest.

Affin Research said soybean oil premium remains low at around US$75 a tonne but plantationstock prices have strengthened further even though CPO futures continue to range from RM2,600 to RM2,700 in recent weeks.

“We maintain our 2014/16 CPO average selling price forecast of RM2,700 as well as our sector Neutral rating and stock recommendations. Key stock picks are Sime Darby, Felda Global and IOI Corp,” it said.

The research house pointed out roduction had indeed peaked in October as November 2013 CPO production declined 5.6% on-month to 1.86 million tonnes.

Fresh fruit bunches (FFB) and oil yields declined on-month for the Peninsular and Sarawak but were higher for Sabah. Year-on-year, the decline was however only 1.6% as November 2013 production almost matched the unusually high production in November 2012 (+16.2% on-year).

Year-to-date, total CPO production increased by 3.2% to 17.55 million tonnes, 1.9% ahead of MPOB’s forecast for January-November 2013 and barring a worsening of monsoon floods this month, will likely match or exceed MPOB’s full year 2013 forecast of 18.9 million tonnes (+0.5% from 2012 actual production of 18.8 million tonnes).