Sipef added its voice to commentators calling time on the
rout in palm oil futures, but remained sceptical over the prospect for a
recovery, foreseeing something of a rangebound future for rubber prices too.
The plantations group said that "most bearish factors seem
to be priced in" to palm oil prices, which on the Kuala Lumpur futures exchange
hit 2,035 ringgit a tonne on Thursday, the lowest since October 2009.
Sipef highlighted the prospect of a record harvest of
soybeans, the source of soyoil, as behind vegetable oil market weakness which
had been highlighted by a "shocking" drop of $300 a tonne in the price of palm
kernel oil since the start of July.
The reduced threat of an El Nino, which typically causes crop-threatening
dryness in South East Asian palm oil-producing areas, had also weighed on
prices as had, on the demand side, a failure by Indonesia to meet a target of a
10% blend of biodiesel in its diesel mix.
Biodiesel is made from vegetable oils, in Indonesia from
palm oil, of which the country is the top producer.
However, current palm oil prices meant it was "definitely
beneficial" to blend in biodiesel, the group said, echoing comments from analysis group Oil World earlier this week.
"We will continue to watch whether Indonesia's government
will be stronger at enforcing the B10 biodiesel mandate, which so far has been
rather disappointing," Sipef said.
And palm oil production in South East Asia, responsible for
the vast majority of global output, "could be affected by the dry spell that
most growing regions experienced in the first quarter of 2013".
"Looking at current [price] levels, there seems to be little
downside, although the upside seems rather limited as long as the big [US] soybean
crop is realised."
Rubber loses its
For rubber too, which remains near its own five-year low on
Tokyo's futures exchange, it looks like prices "the time being the market will
remain in a narrow trading range".
While rubber inventories in China, the top importer of the
tyre ingredient, have fallen by 20%, "this is not yet sufficient" to spark a
rally, Sipef said.
And even if Thailand, the top exporter, succeeds in a drive
to reduce supplies through measures such as adding rubber to asphalt and by encouraging
replanting, so taking some production capacity temporarily offstream, "these
factors will only impact the market on medium term".
The International Rubber Study Group this week forecast a
world rubber production surplus of 202,000 tonnes next year, following on from surpluses
last year of 650,000 tonnes and 371,000 tonnes expected for 2014.
Tea hotting up
However, the group was more upbeat on tea prices, forecasting
a continuation in the recovery from levels which, in late May, fell to $2.60
per kilogramme for top quality Best Broken Pekoe Ones in benchmark Nairobi
auctions, the lowest since late 2008.
Prices, which at Tuesday's auction stood at $3.42 per kilogramme,
"have increased since the lows of June, ahead of the wintering period in Kenya,
and any weather distortion in Kenya will strengthen this movement", Sipef said.
"Also the Pakistani demand for the winter should be kicking
in during the middle of the third [July-to-September] quarter, which could
further boost tea prices."
The comments came as Sipef unveiled a rise of 59% to $32.67m
in earnings for the first half of 2014, on revenues up 6.2% at $157.7m.
The group attributed the result largely to "higher market
prices for palm oil" seen earlier in the year, and which it hedged in through
Indeed, Sipef said that "anticipating the recent price
pressure on palm oil markets", it had hedged 79% of forecast output at a,
Rotterdam, price of $976 per tonne, more than $100 a tonne above current prices.
Shares in the company, which forecast "higher" profits this
year than in 2013, stood 3.3% higher at
E55.85 in morning deals in Brussels.