CPO prices to get full La Nina effect by end-May 2009

Crude palm oil (CPO) prices will get the full impact of the rising La Nina weather risks, which are threatening major oilseeds and grain growing areas in the US and South America, by end-May 2009.

La Nina, usually marked by wet weather and abnormal heavy rainfall, was expected to disrupt the 2009 planting season for oilseeds and grains like soybean and corn in the US in March and April, a plantation industry consultant told StarBiz.

He said La Nina could also affect the harvesting season for soybean in Brazil and Argentina from February to April.

“All will depend on the length (time frame) of the La Nina weather pattern in 2009,” the consultant added.

He expects any disruption in planting or harvesting of soybean crops in 2009 would help bolster the currently-weak prices in most agriculture-based commodities, including CPO.

The world encountered a lengthy La Nina phenomenon from 1998 to 2001.

In 2001, it was reported that US farmers planted 1.6% less acreage of soybean and 4.8% less acreage of corn due to the wet weather caused by La Nina.

An analyst with a bank-backed brokerage said that increasing weather volatilities worldwide such as heavy rainfall in South-East Asia and drought in Australia last year led world markets to raise the risk premium for agricultural commodities.

In Malaysia, he said, abnormal heavy rainfall early last year created floods in major oil palm plantation areas like Johor and Pahang, giving a short-term boost in CPO prices.

Meanwhile, plantation stocks were traded higher on Bursa Malaysia yesterday as the CPO price closed above RM1,600 per tonne in line with soybean oil gains on the overnight Chicago Board of Trade.

On Bursa Malaysia Derivatives, the benchmark CPO for March delivery closed RM81 higher at RM1,671 per tonne.

Something2share:

Obviously there will be a greater demand of CPO if there will be less soybean oil due to adverse weather of La Nina affecting soybean crop production and harvest in 2009. Let hope for the rebounce of CPO price as predicted.

Oil palm planters may get cess respite from Govt

I believe my planter friends working abroad will be glad to be updated if they have missed reading the news reported in today thestar online:

The Government is considering a reduction in the Malaysian Palm Oil Board cess payment or even suspend it for a certain period to assist planters in dire straits.

Primary Industries and Commodities Minister Datuk Peter Chin Fah Kui said the Government was willing to look into these options if there was justification that “the cess is truly burdening local planters” given the sharp fall in crude palm oil (CPO) prices.

“I am a reasonable minister. Give me the breakdown on the planters’ respective cost of production and at which CPO price level would these planters hit rock bottom. If necessary, we will audit them,” he told StarBiz in an interview.

Based on annual CPO production at 18 million tonnes and palm kernel production at two million tonnes, the total cess collection is estimated at RM220mil.

Local oil palm planters have been paying about RM11 per tonne in MPOB cess (see table for breakdown).

They also had to pay an additional cess of RM4 per tonne for the Palm Oil Price Stabilisation Fund.

MPOB’s revenue was mainly from cess collection (research and development and licensing enforcement) of RM9 per tonne of palm oil and palm kernel oil produced at the mills and crushers.

Chin, however, said: “To do away with the MPOB cess is like asking us to do away with MPOB, the central body, which takes care of the well-being of the local palm oil industry.”

Citing an example, he said a reduction of 13.3% in MPOB cess provided only about 40 sen savings for every tonne of fresh fruit bunches (FFB) produced.

This would mean the cess of RM11 per tonne of CPO will be reduced to RM9 per tonne while in FFB terms, the cess will be reduced from RM2.20 per tonne to RM1.80 per tonne.

However, Chin said, there was an imposition of a sales tax of 7.5% in Sabah and 5% in Sarawak.
In fact, a reduction of 13.3% in sales tax in Sabah, for example, would provide a higher savings of RM3 for every tonne of FFB produced, he added.

Chin said the Government was looking at various avenues to mitigate the plight of oil palm planters, especially smallholders, due to the weak CPO prices and excess palm oil inventory at 2.3 million tonnes.

“We have counteracted immediately by allocating RM200mil for replanting activities and RM200mil for biofuel initiatives,” he added.

Chin said the Government’s early intervention had stabilised the CPO prices at RM1,500 to RM1,600 per tonne currently.

SARAWAK OIL PALM PLANTERS SEEK RESPITE FROM GOVERNMENT

I believe my planter friends working abroad will be glad to be updated if they have missed reading the news reported in today thestar online:

Sarawak oil palm planters, badly hit by the sharp fall in crude palm oil (CPO) prices, want the Government to give them some breathing space by waiving the windfall profit tax, lowering the cess and sales taxes, and regulating high fertiliser prices.

They have also proposed that the unused portion of the cess collected for the Cooking Oil Subsidy Scheme by the Malaysian Palm Oil Board (MPOB) be refunded directly to Sarawak plantation companies.

A waiver is also proposed for Sarawak plantation companies which are still paying their outstanding cess instalments.

Sarawak planters have paid about RM157mil in cooking oil cess this year.

Sarawak Oil Palm Plantation Owners Association spokesman Paul Wong told StarBiz that Primary Industries and Commodities Minister Datuk Peter Chin Fah Kui had assured the association that its proposals would be studied. The association had a dialogue with the minister yesterday.

“The feedback to our proposals will be made known by January,” said Wong, who is also Sarawak Oil Palms Bhd chief executive officer.

Wong said the minister had also given an indication that Sarawak planters would be allowed to export their CPO tax-free, given the high national CPO stockpile.

About 10 Sarawak-based plantation captains attended the dialogue session, namely Sarawak Oil Palms, Sarawak Plantations Bhd, Solid Group of Companies, WTK Group of Companies, Rimbunan Sawit Bhd, Ta Ann Holdings Bhd, Seatex Development Sdn Bhd, Woodman Group, Rimex Group and KTS Group.

“We can also form a consortium to jointly set up our own refineries if the existing four refiners in Sarawak refuse to abolish the RM40 per tonne discount on our CPO price,” said Ta Ann Holdings managing director Datuk Wong Kuo Hea.

Sarawak Plantation group managing director Mohamad Bolhair Reduan said the Government should use the MPOB cess on research and development to assist Sarawak planters in sustainable management of peat areas as well as cultivating more efficient agriculture practices.

The Sarawak oil palm industry is still at an infancy stage with only about 20% of matured oil palm areas and low yields.

“Given our young plantations, the RM200mil replanting scheme and subsidy by the ministry recently will not benefit Sarawak,” he said.

With the CPO price currently at about RM1,500 per tonne, Wong said many Sarawak planters were incurring substantial losses and cash flow squeeze, given their high cost of production at RM1,800 to RM2,000 per tonne. Planters in the peninsula have a cost of production of about RM1,100 to RM1,200 per tonne.

Be Grateful: Everyday Is A Blessing

Everyday is a blessing, and in each moment there are many things that we can be grateful for. The world opens up to us when we live in a space of gratitude. In essence, gratitude has a snowball effect. When we are appreciative and express that gratitude, the universe glows a bit brighter and showers us with even more blessings.

There is always something to be grateful for, even when life seems hard. When times are tough, whether we are having a bad day or stuck in what may feel like an endless rut, it can be difficult to take the time to feel grateful. Yet, that is when gratitude can be most important. If we can look at our lives, during periods of challenge, and find something to be grateful for, then we can transform our realities in an instant. There are blessings to be found everywhere. When we are focusing on what is negative, our abundance can be easy to miss. Instead, choosing to find what already exists in our lives that we can appreciate can change what we see in our world. We start to notice one blessing, and then another.

When we constantly choose to be grateful, we notice that every breath is a miracle and each smile becomes a gift. We begin to understand that difficulties are also invaluable lessons. The sun is always shining for us when we are grateful, even if it is hidden behind clouds on a rainy day. A simple sandwich becomes a feast, and a trinket is transformed into a treasure. Living in a state of gratitude allows us to spread our abundance because that is the energy that we emanate from our beings. Because the world reflects back to us what we embody, the additional blessings that inevitably flow our way give us even more to be grateful for. The universe wants to shower us with blessings. The more we appreciate life, the more life appreciates and bestows us with more goodness.

Something2Share:

I like it that everyday is a blessing.

For a retiree like me just stopped working at the age of 62, every morning I give thank to God for another day when I wake up and able to go for brisk walking and continue other activities throughout the day.

I am grateful that I am able to learn how to adjust myself to retirement lifestyle.

I am grateful that I can now really relaxing after years of hard work in plantations.

I am grateful that I can now spend more quality time with my family.

I am grateful that I will have more free time for travelling abroad with my wife.

I am grateful that now I can spend more time with my friends in kopitiam or coffee shops.

I am grateful that I can now have more time to do things that I like to do.

I am grateful that now I have time to learn new things that I have not done before.

When I went to see an Urologist last week, he told me that my prostate enlargement was 3 times of its original size. The choice was on me: Do I want to continue medication and keep suffering the problems of urination or to go ahead for surgery to remove the unwanted benign prostate tissue which is causing obstruction to urine flow from my bladder? In fact I had already decided to go ahead with laser surgery to remove the obstructing prostate tissue instantaneously with minimal risk, blood loss and discomfort.

I am grateful that the surgery was carried out smoothly and I was discharged from the hospital the following day.

Boustead: CPO will rebound in first-half 2009

The major owner of the plantation Al-Hadharah REIT (Real Estate Investment Trust) expects palm oil prices to trade between RM2,000 and RM2,200 a tonne.

BOUSTEAD Holdings Bhd believes palm oil prices will bounce back to between RM2,000 and RM2,200 a tonne in the first six months next year, boosted by shipments to China and the government's effort to cut stockpiles.

Prices of the commodity have already fallen 66 per cent from their peak of RM4,486 a tonne in March, to RM1,510 for February delivery, yesterday.

The major owner of the plantation Al-Hadharah REIT is, however, convinced that prices will improve in the first half next year.

"Crude palm oil (CPO) is mainly used for food. We believe the buyers from China will continue to use palm oil because of the price difference - it's now at a US$300 discount to soya oil. That's quite attractive," Boustead group managing director Tan Sri Lodin Wok Kamaruddin said at a press conference in Kuala Lumpur yesterday.He blamed the current weak CPO prices on excess stocks due to high production, as well as the falling crude oil price which has dropped drastically from nearly US$150 (RM545) a barrel not too long ago to below US$45 (RM163) currently.

CPO prices have been tracking that of crude oil because it can be used to produce biofuel.

The government has also announced plans to boost the usage of palm oil, which will help to cut stockpiles, Lodin Wok said.

This includes getting government vehicles to switch to biofuel for power, a plan that will later involve industrial vehicles, he said.

The government has also set aside RM200 million to speed up the replanting of oil palm trees that are more than 25 years old.

Boustead is selling two more estates into the Al-Hadharah REIT, boosting the world's first Islamic plantation property trust to RM805 million.

The REIT, 60.5 per cent held by Boustead after the asset sale, is paying RM188.8 million for both the Malakoff and Bebar estates.

With a low gearing of 15 per cent, Lodin Wok said, the REIT aims to buy more assets to expand its size. A REIT cannot exceed 50 per cent gearing under the Securities Commission's rule.

Something2Share:

One morning I was talking to RS, a plantation owner, as we were doing brisk walking at the golf course in Segamat Country Club. He was puzzled why the drastic drop in CPO price was linked to falling crude oil price. Previously, the rise or fall of CPO price was linked mainly to soya oil price.

This morning as I was talking to Mr. Khor, a tractor dealer, he reminded me that the unusual escalating CPO price was in fact boosted up in the name of BIOFUEL due to the skyrocketing crude oil price. It reached the record high at USD 147.27 a barrel in mid-July 2008.

I think many plantation companies and owners can still be lauging to the bank if the CPO prices will be traded between RM 2,000 - 2,000 per tonne.

By rough calculation, if COP (Cost of Production) is estimated at RM1,500 per tonne of CPO, and the trading price is expected to be traded at RM2,200 per tonne, then the profit margin will be about 47%.

If COP is estimated at RM1,300 per tonne of CPO, and the trading price is expected to be traded at RM2,000 per tonne, the profit margin wii be about 54%.

Perhaps instead of focusing on how, where and when to cut cost, we should look at ways and means to increase oil yield per hectare in order to reduce COP. Any attempt to cut fertilizer input will affect the yield quite adversely 2 years later.

Higher palm oil prices expected in 2009

Global palm oil prices are likely to rise in 2009 as stocks in key exporters Malaysia and Indonesia fall, Hamburg-based oilseeds analysts Oil World said yesterday.

“The palm oil market is torn between the bearish outside developments, especially very weak crude mineral oil, and its own constructive longer-term fundamentals,” it said.

Palm oil prices have fallen by almost 60 per cent from a record high in March after the global economic crisis hit commodity markets.

“We expect appreciating palm oil prices in 2009 due to the prospective reduction in Malaysian and Indonesian palm oil stocks in December/June 2008/09 resulting from a decline in the biological yield cycle, seasonally lower production (and) higher demand for edible palm oil,” it said.

New government rules compelling more vegetable oil to be blended with fossil fuels to reduce pollution is also likely to generate extra demand for palm oil, it said. Indonesia, Malaysia and Colombia are among countries which are compelling more palm oil blending with fossil fuels.

“The current low palm oil prices, relative to other edible oils, will stimulate demand in the near to medium-term,” it said. “The decline in world exports of soy oil will shift demand to palm oil.”

But it warned the global economic crisis made physical palm oil demand difficult to assess. - Reuters

Something2Share:

With the recent sudden drastic drop in CPO price, everyone in the plantation sector in Malaysia and Indonesia has been very panic striken. Cutting cost has been the major issue for reviewing Budget 2009. In view of the high cost of fertilizers, the top management teams have been debating on reducing fertilizer input in 2009. The main concern is how to maintain the cost of production so as there will be still room for making profit. To the employed planters, they are most worried about “hair-cut” on their salaries and bonus since Christmas, 2009 New Year and Chinese New Year are around the corner.

The above news is, indeed, very encouraging and I believe it’s a booster jab for the plantation companies, the plantation owners and the planters. If what is expected (appreciating pal oil prices in 2009) comes true, at least we are able see light in a dark tunnel.

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.

TALK LESS DO MORE

This is a cigarette’s advertisement on a big signboard across one main road in Medan, on my way to Tembung office. I am not interested on the brand of the cigarette advertised as I am a non-smoker. I was attracted by the phrase it used for advertisement, i.e. “TALK LESS DO MORE”. This reminded me of the English proverb, “ACTION SPEAKS LOUDER THAN WRODS’. Obviously, people who DO MORE are men of action.

It seems to imply that people who are not men of action tend to TALK MORE DO LESS. They are always gossiping, complaining and chit-chatting that they keep on talking, talking and talking, especially when they are on the phone, so much so that more time is spent on talking and there is little time left for doing. These are the people as if they are the empty drums making the most noise.

There are certain professions such as teachers, lecturers, actors, lawyers, motivators, advisors and consultants who are required to TALK MORE DO MORE. Politicians also TALK MORE, especially during election campaign, but not many politicians DO MORE.

I feel sorry for you if you TALK LESS DO LESS. You have nothing to show not to mention the least expectation of you to excel in performance.

There are planters who TALK MORE and also planters who TALK LESS. It’s not important whether they TALK MORE or TALK LESS, they need to WALK MORE DO MORE.