Steadier prices of palm oil by-products have helped soften the blow suffered by plantation companies following the sharp fall in crude palm oil (CPO) prices, especially those with downstream operations, analysts said.
“One of the things that people don’t talk about is the other palm oil-related derivatives (commodity futures), which can at times be better when CPO futures are down,” Jupiter Securities head of research Pong Teng Siew told StarBiz.
Crude palm kernel oil (CPKO), which is a raw material for soap, had a more stable demand than cooking oil, he said, noting that the demand for cooking oil was one of the main drivers of CPO price.
“There is not much speculation to drive CPKO prices to unsustainable levels,” he added.
While the volume of CPO futures has fluctuated in the past three weeks, there had been effectively no trading in CPKO futures in the same period.
Prices of downstream products such as refined, bleached and deodorised (RBD) olein, used to make cooking oil, had been quite stable, along with palm kernel, which was currently fetching prices of about RM200 more per tonne than CPO.
A chief executive officer of a medium-sized plantation group said that while it was true that palm oil products other than CPO could be more stable in price, only players with downstream operations involved in milling and refining the oil would benefit.
“For plantations with upstream operations, our main revenue is 90% from CPO and only 10% is from the sale of palm kernel to kernel crushers,” he said.
Certainly, more stable prices for other palm-oil related products would “benefit those that are further down the line such as refineries, millers,” he noted.
Interband Group palm oil trader Jim Teh said low trading volumes of palm oil futures other than CPO, were not necessarily a good thing.
Bursa Malaysia might want to replace CPKO futures with RBD palm olein or RBD palm stearin, to generate more trading interest, he said.
Meanwhile, Glenealy Plantations (Malaya) Bhd aims to increase overall efficiency and plantation yield to sustain earnings rather than focus on any particular palm oil product that has price stability.
Managing director Yaw Chee Ming in a statement to StarBiz said: “Gleanealy emphasises the effective and efficient management of the estates, mills and its planting programme.
“The group’s plantation maturity profile comprising palms that are reaching peak production cycle should bring consistent improving and higher yields to the group.”
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