Wednesday, November 4, 2015

Stability in Financial Markets? CPO

The anxiety over USD strength has subsided. Like any Psychology 101 class will tell, you have gone past denial phase and now in acceptance stage. Well done, just learn to accept MYR will trade 4.00+ against USD.

With haze over Malaysia subsided, next you should ponder over the 2Million hectares of new planting coming to harvest in 2 years. Yes, you can google the land size involved in the recent haze from Indonesia. It is about 4X bigger than SIME oil plant plantation size. Now in 2-3 years you are going to enjoy bumper crop from Indonesia.

El Nino is likely to be El NoNo with less rain and my best bet is NO FLOOD in Malaysia affecting FFB harvesting. Expect good weather since in IndoChina is experiencing less rain fall this year!!!! This is good news for Oil Palm without flood, harvesters can go round harvesting during monsoon right through next year. Welcome to FFB bumper crop. The bad news is where the heck are the millers going to store the CPO???? In the ground I guess. There is not going to be enough storage tanks to go around.

Coming to winter in the northern hemisphere, demand for CPO will definitely drop in favor of soy oil. The reason is simple. CPO solidify below room temperature. How the heck are you going to discharge the CPO during winter with a frozen CPO in tankers? Heated tankers of course. Who will be paying for this extra charges? The logistics on the ground will be more interesting since it is the responsibility of the on ground buyers to solve this solid CPO. Do you think these Chinese buyers are going to build heaters for CPO???? ARE YOU JOKING!!!!

In summary, we have EL NONO favoring good monsoon, bumper crop right through 2016....low export of CPO from Dec through Mar.

Can CPO futures 2400 hold for next 6 months? Will haze induce more flowering instead of reverse?
Let market lead us as the numbers come in ......

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