Sipef put a dampener on hopes for a rebound in palm oil prices,
revealing it had accelerated forward sales, amid expectations that high inventories
will "remain a burden" to values.
The Belgian-based plantations group said that it had sold
forward 53% of its expected palm oil output for 2013, ahead of levels of 45% at
the same time in both 2012 and 2011.
Sipef, highlighting an "uncertain price outlook" for palm
oil, said that "the high stocks, in origin as well as the main importing
countries, will remain a burden to the market".
Official monthly reports in Malaysia, the second-ranked producing
country, have shown inventories hitting record levels, "and for that matter
also in Indonesia", although Sipef acknowledged the dearth of official data on the
top producing nation.
Palm vs soy
The palm oil market "will not rally on its own", despite a
seasonal decline in output in Indonesia and Malaysia, which is set to erode
Rather, the market "focus" will be on the degree to which palm
oil's historically high discount to soyoil, the rival vegetable oil, encourages
buyers to switch.
Furthermore, the dry weather in Argentina - where dry
weather has prompted a succession of crop downgrades, including a cut by
Lanworth on Wednesday of 2.0m tonnes to 49.6m tonnes in its estimate – and lingering
drought in parts of the US Midwest could boost soy prices, and with them palm
"If anything goes wrong with one of these crops, palm will
definitely borrow some of its strength," Sipef said.
Rubber price outlook
The acceleration in forward palm oil sales contrasted with a
slowdown in advanced coverage in rubber, for which Sipef has sold 20% of its
expected output, compared with 25% a year ago, and 39% at this stage of 2011.
While rubber demand in the West is "fairly patchy… economies
in the East, particularly China and India, are having strong performances, and rubber
demand seems to be rather robust.
"We therefore see little downside to current market prices,"
the group said, if adding that the "fundamentally, the market is not strong
enough to expect a significant price rally".
With prices of tea, which Sipef grows in Sri Lanka, "expected
to remain firm" in the current quarter at least, the group said it was "on
track for a satisfactory result in 2013", thanks to the advanced level of palm
oil sales and hopes for "good crops for the entire group".
The comments came as the group unveiled a 28% drop to $73.5m
in earnings for 2012, or of 28% to $64.6m once the impact of plantation revaluations
is stripped out.
Revenues fell 9.6% to $332.5m, as weaker palm oil and rubber
prices offset the impact of higher volumes of all Sipef's major crops, which
also include bananas, grown in Ivory Coast.
Costs rose too, notably in Papua New Guinea, where a 12.1%
jump in the value of the kina "reinforced the impact" of higher salaries, and
the extra maintenance required following "freakish weather" at the start of
2012, when its plantations received particularly heavy rains.
The group's Papua New Guinea plantations suffered a
particularly wet January too, receiving nearly one-quarter of annual rainfall over
the month, and leaving palm oil output 18% below expectations.
"But we do expect a recovery in the next months," Sipef
said, in comments which echo those of peer New Britain Palm Oil, which earlier this month highlighted fresh Papua New Guinea inundations.
Sipef shares closed 3.0% down at E60.75 in