KUCHING: A short term rally of palm oil price is expected to occur with prices possibly hiking up higher than previously expected.
To recap, soybean prices shot up as high as US$14.56 per bushel, taking out this year’s peak at US$14.2. At present, soybean price is now at its highest level since mid-2008 as adverse weather in the US threatened a lower yield.
International Grains Council in its report noted that unfavourable hot and dry weather along with lower acreage would reduce the production of US’s soybean by 8.2 per cent to a three-year low of 83.2 million tones.
Additionally, soybean oil also moved in tandem, touching a high US$0.5868 per pound but has yet to make year-high.
The rally widened palm oil’s discount to soybean oil to register at US$249 per tonne. To reflect back, when the flood threatened yields the US Midwest in 2008, the spread widened to as much as US$400 per tonne.
Despite the spread widening, analysts at OSK Research Sdn Bhd (OSK Research) believed that palm oil price would be pulled along, especially when palm oil yield in Indonesia and Malaysia were also under threat.
“Although we did not expect soybean price to run up so soon, it was a matter of timing as soybean planting in North America this season will have an increase of frost risk due to the late completion of planting, which leads to later harvesting.”
“The rally also supports our thesis of a short-term rally in palm oil price possibly up to RM3,500 to RM3,600 per tonne levels. This is despite palm oil price falling below the RM3,000 levels as we saw no follow through selling below that level, which tells us that palm oil price will not stay below RM3,000 for long,” opined the research firm.
With financial results of plantation companies in the June quarter being satisfactory and forecasts having been broadly upgraded, analysts believed that plantation stocks were poised for a rally.
Groups like Golden Agri Resources Ltd, First Resources Limited, London Sumatra, Kulim (Malaysia) Bhd remained the research house’s top picks for the purpose of the short-term rally.
“We continue to believe that next year’s average palm oil price will be lower than this year’s hence most companies will still experience a decline in earnings in the mid-term. Nevertheless, a run-up in palm oil price, should it occur as we expect, will still lift the prices of plantation stocks in the short term,” said OSK Research.
source - www.dailymirror.lk
No comments:
Post a Comment