KUCHING: The plantation sector saw a 22 per cent dip in average monthly fresh fruit bunch (FFB) yields in the first quarter of this year compared with the preceding 12 months, much lower than the average decline of 12 per cent.
According to a research note by ECM Libra Capital Sdn Bhd (ECM Libra), “The first quarter of 2012 registered monthly average FFB yields of 1.28 metric tonnes per hectare. This was also the lowest among the previous five years.”
It believed that this suggested that production in 2012 might be weaker than expected due to tree stress. The La Nina event that occurred during the tail-end of 2011 might also be unable to boost yields sufficiently due to the short duration and mild nature.
The research house also noted that the three months 2012 export numbers currently made up 22 per cent of 2011’s total exports.
“Year-to-date (YTD) exports were primarily driven by exports to Egypt which experienced political and social unrest during the ‘Arab Spring’ in 2011,” ECM Libra explained.
It added that exports to Pakistan could also suffer going forward as it signed a Preferential Trade Agreement with Indonesia in February. This would allow it to import Indonesian crude palm oil (CPO) at more favourable rates.
On the soybean front, South American soybean supply estimates saw further cuts as a result of crop losses.
“Estimates have now been cut continuously for five months and current estimates stand 15 per cent below original estimates in November 2011,” the report stated.
ECM Libra opined that China’s buying policy for soybeans might switch to North America in the coming weeks as South American supplies grew tighter.
The research house maintained a neutral view on the sector as YTD, CPO prices had only managed to jump eight per cent to its peak in April. It highlighted that, comparatively, only Genting Plantations Bhd managed to outperform CPO prices at 12 per cent YTD.
It went on to recommend Kuala Lumpur Kepong Bhd (KLK) as Indonesia’s revised tax structure put Malaysian companies with significant downstream operations at a disadvantage. Thus, KLK’s better position in Indonesia with 57 per cent of total land located in the republic had enabled it to see better margins than its local counterparts once its refinery was operational.