PETALING JAYA: The earnings of plantations companies will be on the back foot for the final quarter of 2023 (4Q23) due to weaker crude palm oil (CPO) prices during the period.

The sector could, however, see a new normal with CPO prices trading between RM3,000 and RM4,000 a tonne due to supportive fundamentals.

RHB Research expects 4Q23 earnings for the sector to decline quarter-on-quarter (q-o-q) and year-on-year (y-o-y) as production output declines post peak season and the down trending CPO prices having a higher leverage on earnings of companies.

Industry insiders expect the bearish forces could remain for much of 2024 but for CPO to hold above the RM3,000 per tonne price level, helped by sustained demand from main markets like China and India, which will help offset weaker exports to developed markets like the European Union.

“Based on the current fundamental factors such as CPO production stagnating at 18 million tonnes to 19 million tonnes in Malaysia, soybean oil prices remaining above US$900 per tonne and palm oil exports remaining stable, the CPO price range of RM3,000 to RM4,000 is considered normal,” said Datuk Dr Ahmad Parveez Ghulam Kadir, director-general of Malaysian Palm Oil Board.

He has no major concerns about Indonesia CPO production, estimated at 46 million tonnes last year, as there is no strong correlation with Malaysian CPO prices, he added.

“Even though Indonesian CPO production keeps increasing every year, their domestic consumption is also on an increasing trend due to their aggressive implementation of the biodiesel industry and higher demand for edible consumption.

“As a result, Malaysian palm oil exports remain stable in the world markets,” Ahmad Parveez told StarBiz.On the supply side, with cultivated area in Malaysia and Indonesia about to plateau, production growth will be driven by better seeds and plantation practices. One major issue is wage pressure.

“Compared with historical levels, one key factor supporting higher CPO prices is cost inflation, especially for labour,” said Akash Gupta, director at Fitch Ratings Singapore Pte Ltd.

Malaysia has a minimum wage of RM1,500 and the government is working towards a progressive wage policy to raise wages of low-income workers.

Akash’s Malaysian spot benchmark CPO price assumption is US$650 per tonne (around RM3,100) for 2024, and US$700 per tonne (around RM3,300) for 2025, as compared to US$830 per tonne (around RM3,950) in 2023.

He expects CPO prices to weaken in 2024 due to higher output as well as pressure from competing oils such as soybean oil.

“We see higher production in Malaysia, with the resolution of labour shortages which were caused by Covid-19-related restrictions. We also see favourable weather conditions for higher yields, at least in the next four to six months across Malaysia and Indonesia.

The effect of a strong El Nino, if it materialises, should start to be felt from late 3Q24 or early 4Q24 onwards. “Lower cost of fertilisers should also help raise output and weaken CPO prices,” he said.

Ahmad Perveez advised to keep an eye on crude oil prices as higher energy prices tend to make palm oil a more attractive option for biodiesel feedstock.

The weak ringgit against the US dollar also makes CPO more competitive than other competing oils.

The major immediate pressure on CPO price could be brewing in the soybean oil market with the price differential between the two edible oils having narrowed to US$200 a tonne from about US$550 a tonne in September last year.

The narrower spread between the two vegoils could lead to buyers opting for soybean oil purchases while Fitch expects this to encourage higher discretionary biodiesel blending.

With the earnings season set to get underway on Bursa Malaysia, RHB Research noted that the 4Q23 earnings of plantation companies could ease due to lower production and pricing power, especially among upstream companies.

“In Malaysia, while average fresh fruit bunch (FFB) output rose by 4.5% y-o-y in 4Q23, spot CPO prices dropped 5.8% y-o-y. In Indonesia, FFB output is estimated to have risen 3.4% y-o-y in 4Q23, but net CPO prices fell 11.1% y-o-y,” it noted in a report yesterday.

That said, the industry’s 4Q23 performance is likely to be largely in-line with its expectations, based on estimates of production levels alone.

Kuala Lumpur Kepong Bhd  may underperform its forecast based on FFB output with FGV Holdings Bhd  outperforming while others post numbers that are largely in line.

It added Malaysian companies with downstream operations may see slightly better q-o-q margins due to the decrease in competition from Indonesia.

Unlike Fitch, RHB Research expects a higher CPO price environment in the first-half of the year in anticipation of a seasonally weaker output and the El Nino impact.

The industry’s longer sustainability is an ongoing effort, with Ahmad Parveez noting it has been proactive in diversifying its application portfolio by exploring and investing in alternative markets where the demand for palm oil is growing.

“This includes sectors such as renewable energy, and oleochemicals products by creating eco-friendly products ranging from detergents to personal care items.

The bioplastics industry presents a novel opportunity for palm oil utilisation, offering a biodegradable alternative to conventional petroleum-based plastics. Most importantly, there is a focused effort on enhancing the value of palm oil in the food industry,” he said.


Sumber : The Star

KUALA LUMPUR: The plantation and commodities ministry and the Council of Palm Oil Producing Countries (CPOPC) plan to further strengthen the collaboration between Malaysia and Indonesia for the benefit of the palm oil industry in both countries.

Following a visit from the CPOPC today, plantation and commodities minister Johari Ghani said the matters discussed included disseminating information to the world on the high standards in palm oil production in Malaysia and Indonesia.

“Palm oil production is vital to Malaysia’s economy, and we are the second-largest producer globally after Indonesia,” he said in a post on X.

Johari said the CPOPC’s efforts were among the strategies to promote Malaysia’s palm oil industry and make the commodity the global vegetable oil of choice.

“This is also to ensure that the global community is aware of the benefits of palm oil,” he said.

On Monday, Egyptian ambassador Ragai Tawfik Said Nasr visited Johari to discuss making Egypt a gateway to expand Malaysia’s palm oil exports to Africa through the Suez Canal Economic Zone.

The minister said the governments of both countries were exploring a partnership in marketing palm products, with the involvement of private players.


Sumber : Free Malaysia Today

Indonesia and Malaysia, the world's leading producers and exporters of crude palm oil (CPO), have openly challenged the European Union Deforestation Regulation (EUDR). They believe the implementation of this regulation could be detrimental to their economies. The bone of contention lies with the potential restrictions the EUDR could place on the import of CPO into European Union countries, which is a significant source of revenue for both nations.

The Diplomatic Front

Malaysian Foreign Minister Mohamad bin Hasan has been vocal about his country's concerns. He suggested that the EUDR is enacted with ulterior motives, primarily to favor other vegetable oil commodities within the European market. This, he emphasized, is not in good faith and does not align with fair trade practices.

His Indonesian counterpart, Foreign Minister Retno Marsudi, echoed these sentiments. She conveyed that both nations had made their shared concerns clear during the 24th ASEAN-EU Ministerial Meeting held in Brussels. The unified stand of these major palm oil-exporting countries reflects their determination to protect their economic interests.

Seeking a Solution

Musdhalifah Machmud, a representative from the Coordinating Ministry for Economic Affairs in Indonesia, highlighted that the government is looking to the Ad Hoc Joint Task Force (JTF) on EUDR for a concrete solution. One such proposed solution is a delay in the regulation's implementation. This, they hope, will provide a buffer for smallholder plantations and mitigate the potential economic fallout.

The united front presented by Indonesia and Malaysia was further solidified during the 2nd meeting of the Ad Hoc JTF on EUDR held in Putrajaya, Malaysia. In a significant move, Indonesia requested a delay in the implementation of the EUDR. This request underscores the earnest efforts of both countries to safeguard the interests of their respective economies, particularly the smallholder plantations that heavily rely on CPO exports.


Sumber : The People’s Network

PUTRAJAYA (Feb 7): The Ministry of Plantations and Commodities (KPK) will take stern action against any party involved in discriminatory or negative labelling of palm oil.

In a statement on Wednesday, the ministry said it takes the issue seriously and will take strict action in accordance with laws and regulations against importers, traders, sellers, and related parties who commit such offences.

"The Multi-Agency Enforcement Force (MAEF) conducted inspections at several premises in Selangor under the Trade Descriptions (Prohibition of Use of Statement, Expression or Indication) (Oil Palm Product and Palm Oil Goods) Regulations 2022 on Jan 26.

The penalty for a violation of the above regulations is a fine of up to RM220,000 or imprisonment of up to five years.

“During the inspections, it was found that some food products in these establishments were conspicuously labelled with discriminatory labelling against palm oil (DLAPO), for example with statements such as 'no palm oil' or 'without palm oil',” it said.

These shops included those selling local products such as baby food and imported food labelled DLAPO.

It is important to note that some importing companies placed stickers on the investigated products labelled "Imported and distributed by".

"During the inspections, the shop managers were informed of the ban on the use of the label and asked to clear the shelves until further action is taken.

"Warnings have also been issued to the involved premises to stop selling products with discriminatory labeling against palm oil and to remove existing products from the market immediately," said the statement.

KPK said follow-up inspections will be conducted to ensure the same problems are not repeated and warnings will be issued to prevent enforcement actions by MAEF that could lead to fines and product seizures.

 According to KPK, such labelling techniques give consumers the negative impression that the use of palm oil is harmful to health if the product contains palm oil.

"Apart from that, the action also damages the good reputation of palm oil industry in the country and violates the principles of fair and transparent trade," it said.


Sumber : The Edge Malaysia

KUALA LUMPUR, Feb 7 ― The Ministry of Plantation and Commodities intends to make Egypt an essential part of its plan to expand Malaysia's palm oil exports to the African continent through the Suez Canal Economic Zone.

Its minister Datuk Seri Johari Abdul Ghani said economic cooperation in the palm oil sector between Malaysia and Egypt was discussed in his meeting with the Egyptian Ambassador to Malaysia Ragai Tawfik Nasir on Monday at his office.

"Egypt is a strategic country for our palm oil industry because palm oil makes up almost 90 per cent of Malaysia's exports to Egypt.

"Egypt has a population of more than 110 million people,” he said in a post on X today.

He also said that both countries are exploring a partnership in palm product marketing strategies involving government-linked companies along with the cooperation of private players in both countries.

In addition to Malaysia’s strong position as palm oil exporter to the country, Egypt is strategically located to be a potential gateway to other North African countries, he said. ― Bernama


Sumber : Malay Mail