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KUALA LUMPUR (September 21): Tighter supply and higher demand for crude palm oil (CPO) are likely to drive up edible oil prices in favor of producers, according to IJM Plantations Bhd.
In a statement after its annual general meeting (AGM) today, the upstream plantation company said palm oil producers will be able to “take advantage of the price wave.”
The planter noted that CPO prices had rebounded to RM3,000 per tonne from a year-to-date (YTD) low of RM2,000 per ton in May, and analysts attributed the higher prices to restocking. , lower levels of palm oil inventory and higher prices of competing edible oils.
Nonetheless, IJM Plantations said it is taking a cautiously optimistic outlook for the financial year ending March 31, 2021 (FY21).
“While the above factors may be optimistic, there could always be a decline in prices amid pressure from rising inventory levels towards the end of the year, in line with palm oil production potentially exceeding exports and total consumption.
“However, recent revelations – that many planters have a real and substantial shortage of workers, making it difficult to [their] operations, especially during the seasonal peak, which affect the recovery of the tree harvest, will support current crude palm oil prices, ”he said.
At the same time, he noted that overall crop production and CPO production in fiscal year 21 may end up being lower than in fiscal year 2020.
The planter said crop production is expected to be lower this year due to the lagged effects of dry weather in August and November 2019 on palm oil growing areas in Malaysia and Indonesia, combined with a reduction in input. of fertilizers among producers.
Labor shortages will also affect crop production, especially in Malaysia, by preventing harvesting in the next peak production season, and crop yield losses across the industry are expected to be high.
The CPO production of many mills is also expected to be lower given lower oil extraction rates (REA) due to poor bunch formation following lower pollination efficiency due to dry weather.
Additionally, the probability of La Niña (wet weather) from September to November has increased to 60% from the previous 30%.
“The reality of La Niña at the end of the year would also further reduce prospects for increased crop production. During the incessant rainy season, operations, from harvest to evacuation of crops and the quality of the palm product, will be hampered, ”said IJM Plantations.
That said, global demand for palm is poised to rebound due to loosening locks and major consumers such as China and India making market-driving purchases to replenish dwindling stocks.
Using more palm oil in biofuels, particularly in Indonesia, will also serve to reduce stocks and increase prices.
For the first quarter ending June 30, 2020 (1TFY21), the planter went back to black with a net profit of RM82.12 million, from a net loss of RM76.39 million for 4QFY20 and 4 , RM 78 million in 1QFY20 net loss. .
The biggest gains were attributed to RM91.74 million in foreign exchange earnings (forex).
Quarterly revenues stood at RM205.99 million, compared to RM95.39 million in 4QFY20 and 54.8% more year-on-year compared to RM133.07 million in 1QFY20, after higher prices of raw materials and turnover.
Shares in IJM Plantations rose 1.62% or three sen to RM1.88 as of 3.28pm today, valued at about RM1.66 billion. He saw 812,200 shares traded.
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