SPECULATION A THREAT TO OIL PALM PLANTERS

This write up by LOONG TSE MIN is downloaded from thestar online (Saturday December 6, 2008) and is of interest to all planters.

Speculation in the crude palm oil (CPO) futures market could pose a threat to the plantation industry under current market conditions.

Interband Group palm oil trader Jim Teh told StarBiz that there was a strong speculative element in CPO prices that shot up from RM1,488 per tonne to about RM1,600 last week on thin volume but had tapered off this week

He said importers from China and India had early this year defaulted on their contract orders partly due to speculation as “CPO prices were pushed up and then suddenly dipped”.

Many of the contracts were locked in at RM3,000 per tonne. When CPO fell to RM2,500 per tonne in August, importers in both countries lapsed on their contracts amounting to about 150,000 tonnes.

At the current CPO price of about RM1,500 per tonne, Teh said a further 300,000 to 400,000 tonnes worth of CPO futures contracts were defaulted in October.

“If prices are high but importers default on the contracts, what is the use to the planters?” Teh asked.

Fertiliser prices had shot up in tandem with the CPO price, he said, adding: “Planters, especially smallholders, will be hit in terms of high cost of fertilisers and left with excess stock.”

Teh estimates CPO to trade between RM1,300 and RM1,450 per tonne for the first half of 2009.

At an average price of RM1,400 per tonne, most plantation companies would still have a profit margin of about 25%, which was good, given the current market conditions, he said.

A chief executive officer with a major plantation group holds a differing view.
“I don’t think there is much speculation as most of the foreign funds have left the (CPO) market.

We can see that CPO prices have not dropped to RM1,200 as predicted even as crude oil falls below US$50 a barrel, which is a sign that CPO price is quite stable,” he said.

He also did not see how higher prices were bad for the industry as it gave better profit for plantation companies.

However, United Malacca Bhd CEO Dr Leong Tat Thim concurred with Interband’s Teh.
“Aggressive fluctuation in CPO prices is not good for the industry as it is bad for both buyers and sellers,” Leong told StarBiz.

“Prices between RM1,600 and RM1,800 per tonne will be good and viable to the industry.”

Leong said he expected the CPO price to hold at its current level and bounce back to RM2,000, by the end of next year.

This was due to measures taken by the Government to reduce the current high CPO stock through replanting subsidy and mandatory use of biofuel in all commercial vehicles, he said.

“There is another favourable factor which is the wide price disparity of US$300 per tonne between CPO and soya bean oil prices.

“This makes palm oil a very attractive alternative,” he added.

Leong said planters were trying to keep costs below RM1,000 per tonne of CPO.

“During these difficult times, I hope the Government at federal and state levels will not consider imposing additional taxes on the palm oil industry.”

GREEN GREEN GRASS OF HOME

I am learning to adapt myself to the retirement lifestyle after returning from Indonesia to Malaysia about a week ago. Being a planter for so many years, I have been so used to walking the fields in the plantations. However, when I stayed back in Tembung office, Medan, I did not even have the time for a morning walk. I had to leave my residence in Jalan Kartini the latest by 0715 WIB to avoid the traffic jam in order to reach office before 0800 WIB.

Now back in Segamat, Johor, I am able to join my friends for brisk walking in early mornings at Segamat country club. We walk across the green and fairway of the golf course for at least 30 minutes while breathing in the fresh air. This reminds me of the song “GREEN GREEN GRASS OF HOME” sung by Tom Jones. I totally agreed with my friends that walking on the soft grasses is much comfortable to our feet and exerts minimal impact to leg injury than walking on the hard and rough surface of tar road. Nevertheless, we have to be early before the golfers tee off and start hitting the golf balls. My friends are the regular walkers and seldom skip walking except on raining days or go out of Segamat town.

As we are all aware, regular morning walk improves our blood circulation and makes our hearts stronger thus it works more efficiently. My friends tell me that by doing regular brisk walking, they are able to keep fit and stay much healthier than others who fail to make brisk walking a habit. It needs to take initiative and commitment to wake up early to go for morning walk regularly and to stick with it for at least 6 month. There must be persistence full of determination, dedication and discipline if we want to make brisk walking a habit. I remember my late father used to go for morning walk very regularly during the good old days in Kuala Lipis, Pahang. He brought along a long walking stick with him to chase away any stray dogs coming near him. Well, since I am now a retired man, I am determined to treat morning walk as my daily routine too.

Oh Yes. I hope you can join me too to start “Chale Chalo” (brisk walking) from today onwards. And I hope you sing along with me and here are the lyrics of “GREEN GREEN GRASS OF HOME”:

The old home town looks the same,
As I step down from the train,
And there to meet me is my mama and my papa.
Down the road I look, and there comes Mary,
Hair of gold and lips like cherries.
It's good to touch the green, green grass of home.

The old house is still standing,
Though the paint is cracked and dry,
And there's the old oak tree that I used to play on.
Down the lane I walk with my sweet Mary,
Hair of gold and lips like cherries.
It's good to touch the green, green grass of home.

Yes, they'll all come to see me,
Arms reaching, smiling sweetly.
It's good to touch the green, green grass of home.

[spoken:]
Then I awake and look around me,
At the four gray walls that surround me,
And I realize that I was only dreaming.
For there's a guard, and there's a sad old padre,
Arm in arm, we'll walk at daybreak.Again,
I'll touch the green, green grass of home.

Yes, they'll all come to see me
In the shade of the old oak tree,
As they lay me 'neath the green, green grass of home.

Click on http://www.youtube.com/watch?v=hSajFnkUxQY to watch and listen to Tom Jones singing 'Green Green Grass of Home' on Youtube.