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Plantations - Takeaways from the largest palm oil gathering

Shared By Stock Fanatic on Monday, October 12, 2015 | 12.10.15

■ At PIPOC, it was stressed that palm oil is the most efficient vegetable oil crop in the world but faces some challenges to remain competitive.

Key challenges include (1) rising costs of production; (2) negative perceptions; and (3) trade restrictions.

■ Indonesia and Malaysia plan to collaborate to tackle some of these issues.

■ Positive on long-term prospects as genome discovery will help raise future FFB yields. Maintain Neutral and key picks are AALI, FR and GENP

MPOB International Palm Oil Congress and Exhibition (PIPOC)
We attended the PIPOC conference, which was held at the KLCC Convention Centre from 6 Oct to 8 Oct 2015. This biennial event, known to be the biggest gathering of the palm oil industry, focuses on current as well as relevant issues and happenings within the palm oil industry. Below we highlight some of the main takeaways from the event.

Palm oil is the most efficient oil crop in the world
Palm oil is the most efficient vegetable oil crop in the world due to its superior oil yields per ha against other crops. We gathered that by 2050, the world would require 150m tonnes of additional edible oils. Palm oil will be able to supply these requirements with the least amount of land compared to other oil crops.

But there are some challenges to remain competitive
We gathered that the industry is also facing increasing challenges in the form of:

(1) rising costs of production against other competing edible oils due to stagnant yield and rising labour costs;

(2) negative perception of palm oil; and

(3) trade restrictions.

CPOC to address some of these challenges 
Indonesia and Malaysia have recently announced plans to set up the Council of Palm Oil Producing Countries (CPOC).

The areas that both governments hope to collaborate on include (1) addressing the low CPO prices;

(2) better coordination in promoting as well as countering the negative perception of palm oil and

(3) promoting the Asean Palm Oil Sustainability Platform.

CPO price forecast of US$600 per tonne
Dr James Fry from LMC predicted that the CPO price could rise to US$600 per tonne (RM2,460 per tonne) by the end of 1Q16 due to tighter supply conditions. He also projected Indonesian biodiesel consumption to rise to 2.6m tonnes in 2016, from 1.2m tonnes in 2015. This is broadly in line with our 2016 average price forecast of RM2,450 (per tonne).

Positive on the long-term prospects
The challenges facing the industry highlighted at the conference are not new. However, if the Malaysian and Indonesian governments can collaborate effectively to tackle the key challenges, we believe it bodes well for the industry in the medium- to long-term. We are also positive on the recent discovery of the gene responsible for the low-yielding mantled fruit by the MPOB genome team, which should help to raise future FFB yields of the palm oil industry. (Read Report)

Source : CIMB Research

Posted on Monday, October 12, 2015 | 12.10.15
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