Sipef forecast an end to retreats in both palm oil and
rubber prices, saying markets had already factored in a stack of bearish
factors, even as futures in both commodities staged revivals.
The plantations group said that palm oil investors appeared "to
be ignoring the tight stock environment" for the vegetable oil, in allowing a
tumble of some $100 a tonne in Rotterdam prices so far this year.
Kuala Lumpur palm oil futures on Wednesday touched an
eight-month low of 2,450 ringgit a tonne, taking their decline for 2017 to 21%.
The group said: "Everyone is talking about the massive palm
oil crop ahead of us," as production in top growers Indonesia and Malaysia
recovers from drought, blamed on El Nino, which hurt output last year.
Fellow producer MP Evans earlier this month reported that "stocks
of crude palm oil began 2016 at record-high levels, but were drawn down during
the year in response to low production and finished the year at a multi-year
low level of less than 10m tonnes".
Sipef added that the prospect of another huge soybean crop this
year in the US, where sowings of the oilseed are expected to hit a record high,
was "another cloud that is hanging over our market", with soyoil a major
competitor to palm oil for many uses.
However, "this seems to be priced in, and palm oil is
currently competitive versus liquid oil," the group added.
"Therefore, we expect that any surprise that could lead to
supply disruption, such as less growth in palm oil than expected; bad weather disrupting
the US bean development; or longer term, the creation of another El Niño, will
trigger a buying wave."
Consumption from biofuels plants in Indonesia, which has
attempted to boost demand for palm oil by boosting biodiesel use, was likely to
increase too "at these lower prices.
"We remain positive that we are currently at the lower end
of the price range."
Rubber price outlook
For rubber - futures in which have plunged 43% since hitting
a five-year high in Tokyo in late January – Sipef was "confident that we will
keep steady prices in the coming months", albeit with values likely to prove
lower than those enjoyed earlier in the year.
The group acknowledged pressure on values from liquidation
by Chinese speculators, besides a recovery in output in top grower Thailand
from rain damage, with stock sales by the Bangkok government also weighing on
"Despite the current bearish tone, the supply and demand
globally are in much better balance than a year ago," SIpef said.
The comments came as rubber futures soared 4.0% to 211.30
yen a kilogramme in the afternoon session in Tokyo, after touching a five-month
low of 198.00 yen a kilogramme earlier on Thursday.
Palm oil futures stood up 1.5% at 2,503 ringgit a tonne in
late deals in Kuala Lumpur, after in the last session hitting an eight-month
low of 2,450 ringgit a tonne.
Sipef added that it had sold 42% of its forecast rubber
output for the year, at an average price of $2,307 a tonne, a little behind the
49% of forecast production it had hedged as of a year ago – although at a lower
price, of $1,267 a tonne, reflecting the weaker market prevailing at the time.
For palm oil, the group was a touch ahead on hedging compared
with a year ago, having fixed prices for 45% of its forecast production, six points
ahead of the 2016 pace, with the acceleration reflecting a strong start to the year
"The higher-than-expected palm oil production volumes in the
first [January-to-March] quarter allowed us to sell at good spot prices and
already to hedge a substantial part of the second quarter," Sipef said.
The group's palm oil output, at 80,882 tonnes in the January-to-March
period, was 22% higher year on year, with growth "most marked in the mature
plantations of North Sumatra, and in the overall operations of Papua New Guinea",
with increases of 22% and 34 respectively.
However, the company flagged a slowdown in output growth,
saying that "It is already obvious that the strong production increases of the
first quarter will not persist during the second quarter.
"Smaller numbers of unripe fruit are reported in our oil
palm plantations for the coming months, which means that we will see more
'normal' growth volumes of around 10% in the next period."
Sipef shares stood 1.7% higher at E62.27 in morning deals in