MIDF Research positive on palm oil

KUALA LUMPUR: The strong growth of the global economy this year should lead to higher consumption of palm oil, says MIDF Research.

It said on the supply side, consensus estimate of huge supply growth might not be fully realised due to ongoing labour shortage and the potentially high replanting activity in Indonesia.

According to MIDF Research, Indonesia’s plan to replant up to 165,000ha of oil palm this year could limit the supply surge by between 500,000 and 600,000 tonnes, assuming oil yield of 3.5 tonnes per hectare.

It said the European Union’s latest decision to remove duties on biodiesel imports for 13 Argentine and Indonesian producers was positive for crude palm oil (CPO) prices.

“We are not surprised by the news as the World Trade Organisation has ruled in favour of Indonesia on the issues and recommended changes to the measures in January.

“However, the final decision by the European Court of Justice is positive on CPO price as we expect higher demand for palm oil in the biodiesel segment. In the long run, this should lead to lower palm oil inventory level,” it said.

MIDF Research’s top picks are Kuala Lumpur Kepong Bhd and Genting Plantations Bhd.

“We like Genting Plantations as we expect its fresh fruit bunch growth at 13 per cent year-onyear to be the strongest among planters under our coverage.