Wilianto remains positive on the plantation sector. He highlights that record harvest and planting of edible oils are needed to feed the global population thus the structural long term demand for CPO is intact.
The good soybean harvest in Brazil and Argentina this year has put pressure on CPO prices (been moribund and so have the CPO stocks) but Wili argues that this has mostly been priced in now as reflected in soybean/CPO price premium normalizing.
What will affect CPO prices in the S/T?
US Soybean planting next month. USDA survey shows that planting intentions is up only 1% to 74.8m hectares. This is record planting areas but still behind the demand growth of 4.5%
CPO production in 2H. Will seasonally higher production in 2H be able to offset the lower than expected production in 1H? The drought in 1Q2010 will also dampen CPO production in 2H
Top picks in plantation remain London Sumatera (LSIP IJ), Sampoerna Agro (SGRO IJ) and Gozco (GZCO IJ) but the view on the sales desk is that in spite of the good structural long term outlook, on a shorter horizon, CPO stocks are likely to remain under pressure – 1Q2010 results are starting to trickle in and are likely to be on the weaker end - Astra Agro unimpressive weak results yesterday (see below) and is perhaps an indication of what’s to come for the other planters.
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