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GOLDEN AGRI-RESOURCES LTD (SGX:E5H)
Agribusiness - Key Predictions From POINTERS 2021
- Presenters at POINTERS forecast average CPO price of RM4.1k/tonne for 2021F. This means CPO price could decline from the current RM5.1k/tonne.
- The expectation for CPO price to fall hinges on supply recovery for sunflower oil, soybean oil and palm oil in the coming months.
- There is upside to our average CPO price view of RM3.7k/RM2.9k for 2021F/2022F due to supply shortfall stemming from labour shortage issues.
Nine papers presented at the Palm Oil Internet Seminar (POINTERS)
- We attended the POINTERS event theme “Determining Price Direction Amidst Market Uncertainty” on 18 Oct. Speakers at the event expect palm oil supplies to stay tight in the near term, and CPO prices to decline from the current spot price of RM5,118/tonne to average at around RM4,100/tonne in 2021F. The prediction for CPO prices to decline hinges on the recovery in global edible oil supplies as farmers increase their plantings due to attractive prices. The price trends predicted are broadly in line with our views.
Key takeaways from presenters at 2nd edition of POINTERS 2021
- Dato’ Dr Wan Zawawi, CEO of Malaysia Palm Oil Council, lowered his prediction for Malaysia CPO production in 2021 to 18.4m tonnes from 19.6m tonnes (projections made in Apr 2021) due to COVID-19 restrictions and labour shortage. He expects Indonesia CPO production to grow 2.5m tonnes to 45.5m tonnes in 2021F. He forecasted CPO prices to average RM4,131/tonne for 2021F.
- Dr Ahmand Parveez, Director General of Malaysian Palm Oil Board (MPOB), said planted palm oil area in Malaysia fell 0.9m ha to 5.77m ha in 9M21. Of the total planted areas, 45.6% are located in Peninsula Malaysia, 26.5% in Sabah, and 27.9% in Sarawak. In terms of ownership, private and government/state agencies own 73% of the estates, with the balance 27% owned by independent and organised smallholders. He projects Malaysia CPO production to fall 6% to 18m tonnes in 2021F and palm oil stocks to end 2021F at 1.7m tonnes. He projects 2021F CPO price to average RM4,100/tonne.
- Togar Sitanggang, Indonesia Palm Oil Association (GAPKI) Deputy General Chairman, predicted Indonesia's 2021F CPO production to rise 0.44m tonnes to 47.4m tonnes, and palm oil exports to rise 0.416m tonnes to 34.4m tonnes. He revealed that Indonesian output is not as strong as previous years due to lack of new plantings. He also indicated that the wider palm oil and gasoil spread might force the Indonesian government to review the palm oil export levy in 2022F. He said CPO prices may stay high till 1H2022F and forecasted 2021F CPO price (fob Indonesia) to hover at US$1,000/tonne.
- Thomas Mielke, head of Oil World, forecast world production of four major vegetable oils to grow 7m tonnes in 2021/22 (largest growth rate in four years) and predicted that this will push edible oil prices lower. He expects global output of palm oil to rise 3.5m- 4m tonnes in 2021/22 driven by Indonesia (1.7m-2m tonnes), Malaysia (1m-1.2m tonnes) and others (0.8m tonnes). He added that lack of new plantings will slow the growth in new mature areas to only 0.4m-0.5m ha in 2022F vs annual growth of 0.9m- 1m ha up till 2018. He predicts Malaysia would produce 18.2m tonnes of palm oil in 2021F. He expects usage of vegetable oils for energy purpose to rise 1.5m tonnes to 48m tonnes in 2021F (accounting for 18% of world consumption of 17 oils and fats). Overall, he said the current high edible oil prices are not sustainable and that prices should decline in Jan/Jun 2022F, triggered by increase in production and stocks.
- Vipin Gupta, Vice President of IVPA, revealed that palm olein import has negatively impacted the capacity utilisation and refining margins of Indian refineries. He is of the view that India is likely to reduce palm oil olein imports beyond Dec 2021F as the temporary removal of import restrictions on refined palm oil is set to end on 31 Dec 2021.
- Desmond Ng of MPOC said palm oil demand and import in China is dependent on soyabean oil output in China. In 8M21, China import of palm oil grew 310k tonnes to 3.78m tonnes, driven by high discount of refined bleached and deodorised palm olein (RBDPL) against soybean oil and recovery in the hotel, restaurant and café (HORECA) sector. He projects palm oil demand to increase by 0.1m to 6.9m tonnes in 2021F.
Ivy NG Lee Fang CFA
CGS-CIMB Research
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Nagulan RAVI
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-10-19
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