KUALA LUMPUR: Kenanga Research expects crude palm oil (CPO) prices to increase to between RM2,500 and RM2,600 per tonne in second quarter (Q2) this year as stockpiles continue to diminish amid low production season.
The research house believed the inventory peak for plantation is over and expect prices to improve to RM2,300-2,400 per tonne by the end of first quarter on near-term positives such as the resumption of China’s purchases of US soybean and biodiesel initiatives panning out as anticipated.
“Overall, we forecast 2019 CPO price at an average of RM2,400 per tonne, representing a year-on-year increase of seven per cent,” it said in a statement yesterday.
For February 2019, the research firm expected production to decline further by 12.8 per cent month over month (m-o-m) to 1.52 million metric tonne (MT) on seasonality, while exports to retrace by 13.5 per cent m-o-m to 1.45 million MT from a high base.
“All-in, we anticipate supply of 1.59 million MT to fall short of demand of 1.73 million MT, leading to lower ending stocks of 2.85 million MT in February 2019. CPO prices to edge up further to RM2,500-2,600 per tonne in second quarter as stockpiles continue diminishing, before retracing to RM2,200-2,300 per tonne in second half this year when output picks up again,” it said.
The research firm reiterated its “neutral” rating on the plantation sector and recommended selective positions in stocks such as TSH Resources Bhd, given its higher earnings sensitivity to CPO price recovery and Genting Plantation Bhd for its above-average fresh fruit bunches outlook and stable earnings contribution from its premium outlets.
The CPO futures contract on Bursa Malaysia Derivatives stabilised around RM2,000 support level with settlement for spot month February 2019 stood at RM2,195 a tonne, March 2019 at RM2,227 a tonne, April 2019 at RM2,266 a tonne, while May 2019 at RM2,285 a tonne. –Bernama
