Positive supply and demand fundamentals... We believe that the positive basic supply and demand fundamentals would help support CPO prices at a range of RM2,300-2,800/tonne over the short to medium term. Although based on our CPO price range expectations, there does not seem to be that much more upside (possibly another 5-10%) to CPO prices, we believe that in the current market environment, where volatility in external factors is the norm, CPO prices could undershoot or overshoot our projected price range. As such, although CPO prices could potentially hit the RM3,000/tonne mark again, we believe this may not be a sustainable price target in the medium term, due to the demand reallocation which would occur in price-sensitive markets like China and India which would then “re-balance” prices. In the long term, we believe CPO prices would stay above RM2,000/tonne due to structural changes.
Plantation Sector Update : Smooth Or Bumpy Ride Ahead?-01/04/2010
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