Windfall taxes again for palm oil companies?

Oil palm plantation companies in Peninsular Malaysia could start paying windfall taxes again in May and June should the average price of crude palm oil (CPO) touch RM2,500 per tonne this month.

But renewed payment of the windfall tax could be shortlived as CPO prices were likely to retreat as production increased in the second half of the year, industry players and analysts said.

On Bursa Derivatives Exchange yesterday, the CPO price for the benchmark June contract gained RM150 to close at RM2,485.

The Malaysian Estate Owners Association (MEOA) president Boon Weng Siew told StarBiz that planters might pay windfall taxes, at the most, for two months.

“The uptrend in CPO prices can fizzle out with the start of the peak production season from May to November,” he said.

OSK Research plantation analyst Alvin Tai is also maintaining a cautious view on CPO prices as he expects a strong recovery in palm oil production in the second half this year.

The current decline in palm oil inventory had helped drive CPO prices higher, he said, adding that the current price rally was mostly due to weak production rather than strong exports.

Tai said inventory would again go up if production recovered and the rise in production was not matched by an increase in exports.

Maybank Investment Bank analyst Ong Chee Ting is also wary of the current high CPO prices, and is maintaining an “underweight” call on the plantation sector.

CPO futures could trade in the range of RM2,300 to RM2,400 per tonne on concerns over tight supplies, according to MEOA’s Boon.

Ong said with spot CPO prices increasing 18% month-on-month to RM2,351 per tonne, “we are looking at raising our 2009 CPO price assumption to RM1,800 from RM1,600 previously.”

This would raise the net profit forecasts of large-cap plantation stocks by 10% to 25% this year, Ong said.

Under the recent mini budget, the Government set RM2,500 per tonne as the new CPO price threshold for windfall tax collection for peninsula planters and RM3,000 for Sarawak and Sabah planters.

In 2008, an estimated RM260mil to RM300mil of CPO windfall taxes were collected by the treasury from oil palm plantation companies based on the then CPO threshold price of RM2,000 per tonne.

Planters stopped paying the windfall tax last October when CPO prices dropped below RM2,000 per tonne.

Something2Share:

Tan Sri Lee Shin Cheng (the owner-Chairman of IOI Corporation) thinks CPO prices could remain between RM 2,600 - 2,800 per tonne for the rest of 2009. Bullist or not, if prediction of my ex-boss comes true, then it's Win-Win situation for the plantation companies and the Government.

Malaysia’s IOI sees crude palm oil price rising to RM2,600-2,800 per tonne

Malaysia's IOI Corp (IOIB.KL), the world's third-largest listed palm oil producer, said that the price of crude palm oil would rise to 2,600-2,800 ringgit per tonne in the remainder of the year.

Malaysian crude palm oil futures hit a 7-month high on Friday as a slew of industry data warned of tightening domestic inventories, with the benchmark June contract KPOc3 on the Bursa Malaysia Derivatives Exchange closing at 2,299 ringgit ($636.3) per tonne.

"Six months ago I foresaw prices would likely surpass 2,000 ringgit a tonne," IOI's Executive Chairman Lee Shin Cheng told Monday's Business Times newspaper.

IOI shares have rallied along with other planters as palm oil prices have recovered. The stock closed at 4.30 ringgit on Friday, up from an Oct. 28 12-month low of 2.08 ringgit.

Something2Share:

Very good news to the planters. We hope Tan Sri Lee's prediction is absolutely correct, and then the plantation companies can be "laughing to the banks" again.

18,000 Oil Palm Trees Destroyed by Elephants in Malaysia

GUA MUSANG, (Bernama) - A company, which has been awarded a contract to plant oil palms near Pos Blau here, suffered huge losses when 18,000 of the one-year-old palm trees in the 600 hectare plantation were destroyed by elephants since a month ago.

Syarikat Pembangunan Ladang Khazanah Nadi Alam Enterprise manager, Mohd Khazanah Ab Rahman estimated the company losses at almost RM500,000.

He said a herd of five elephants entered the plantation almost every night and destroyed the oil palm trees, as well as banana trees grown as cash crop at the plantation.

The elephants had destroyed about 10,000 of the 75,000 banana trees in the plantation, he told Bernama here.

Mohd Khazanah said workers at the plantation had taken various measures, including burning old tyres at night, to keep away the elephants, but were futile, adding that replanting of the oil palms would be carried out only after the pachyderm returned to the forest area.

He said the attacks by the elephants also caused the 60 workers at the plantation to fear for their safety.

Until now, the pachyderm had not gone near the workers’ “kongsi” (quarters) and the workers also took turns to keep watch every night, he added.

He hoped that efforts would be made by the Wildlife and National Parks Department to catch the elephants.

– BERNAMA

Something@Share:

Just wonder whether any electric fence put up to deter elephant intrusion? Some plantations even dug trenches as a double precaution in addition to electric fencing along the perimeter along the jungle edge.

Crude palm oil futures at 6-month top on surging oil

Malaysian crude palm oil futures soared 5.1 per cent to a fresh 6-month peak yesterday, boosted by rising oil prices and fears of a supply squeeze, traders said.

The benchmark June contract rose as much as RM105 to RM2,175 per tonne before the close, a level unseen since September 29, 2008, before settling at RM2,159, up 4.3 per cent.
“The palm oil market is on a ball as all commodity complexes are looking at the G-20 meeting, taking a cue from the big jump in crude oil prices,” said a trader with a local commodities brokerage.

Oil rose more than US$2.50 per barrel to above US$50 yesterday as rising equities markets bolstered sentiment before a meeting of G20 global leaders which investors hope will deliver measures to restore global growth.

Traders said a recovery in Malaysian palm oil shipments could see domestic inventories in the world’s second-largest producerfall sharply. Cargo surveyor Societe Generale de Surveillance reported a 5.4 per cent increase to 1,223,716 tonnes in March.

Something2Share:

One of my planter friends said, "Now we can smile to the banks."