Sector Update
- Malaysia’s CPO production rose in June 10 by a minimal 2.5% mom, while exports rose by a larger 5.5% mom. As a result, closing CPO stock levels fell to 1.45m tonnes in June (from 1.56m tonnes in May) and stock/usage ratio fell further to 7.8% (from 8.5% in May and versus the 7-year average of 9.1%). However, going forward, notwithstanding any effects of adverse weather, we expect this to potentially start reversing from next month onwards, as it approaches the peak seasonal production period.
- We noted a few main developments in the sector. Long-term positives are: 1) continued decline in stock/usage ratios for the 8 vegetable oils expected in 2011; 2) an increase in the biodiesel mandate in Argentina for 4Q2010 and 2011; and 3) a continuation of La Niña temperatures which could have a longerterm impact on production. Short-term negatives are: 1) the possibility of a reduction of Argentine export tax; 2) the USDA planting data report – which showed increased soybean acreage; and 3) the reduction in competitiveness of CPO vs soyoil.
RHB Equity 360° - 13 July 2010 (Plantation, Fajarbaru; Technical: TimedotCom)
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