Analysts and investors watch carefully for EU decision on CPO as a biodiesel component in Europe.
A pull-back in CPO price is expected if EU were to ban CPO-based biodiesel. Environmental lobby groups are keen to see EU shunting itself from using developing world countries produce on grounds of curbing non-compliant environmental farming practices.
But we can also expect a heavy counter-argument for continuing to use CPO-based biodiesel. The majority of the world's CPO come from Indonesia and Malaysia. The large Malaysian and Indonesian plantation companies are all members of RSPO and are considered compliant corporations. (The Roundtable for Sustainable Palm Oil, RSPO, were set up primarily to address the "sustainability" issues) .
A pull-back in CPO price is expected if EU were to ban CPO-based biodiesel. Environmental lobby groups are keen to see EU shunting itself from using developing world countries produce on grounds of curbing non-compliant environmental farming practices.
But we can also expect a heavy counter-argument for continuing to use CPO-based biodiesel. The majority of the world's CPO come from Indonesia and Malaysia. The large Malaysian and Indonesian plantation companies are all members of RSPO and are considered compliant corporations. (The Roundtable for Sustainable Palm Oil, RSPO, were set up primarily to address the "sustainability" issues) .
So is this intense lobbying for banning CPO-based biodiesel imports into Europe more politically-motivated than environmental?
Even if EU decided to ban or restrict imports, from an investors' perspective, any pull-back is likely to be transient. In fact, investors can find themselves re-entering palm oil stocks cheaply if the pull-back is overdone. Fundamentally, there is little reason not to believe that 2008 will remain a bullish year for CPO.
Let us study the facts.Even if EU decided to ban or restrict imports, from an investors' perspective, any pull-back is likely to be transient. In fact, investors can find themselves re-entering palm oil stocks cheaply if the pull-back is overdone. Fundamentally, there is little reason not to believe that 2008 will remain a bullish year for CPO.
- Europe are still allowed to import CPO as cooking/edible oils. This represents 85-90% of all current EU CPO imports. CPO for biodiesel only made up approximately 10% of the CPO imports.
- The EU has a mandatory to meet a bio-fuel blend of 5.75% by 2010 (2% in 2006). Rape-seed output in the EU is not sufficient to meet this demand.
- Global stock/ usage ratio for vegetable oil and fats is falling. Supply of edible cooking oils are struggling to satisfy India, China and other emerging market demands.
- A poor year for US soya yield is expected; the global inventories for edible oils will continue to support CPO price.
- Indonesia struggles to hit its CPO production target despite expanding its acreage
- Geo-political tension likely to persist, and this would exert upward pressure on fossil fuel price, and this will likely to lead to more calls for fuel alternatives
Another point to consider: interest for CPO will remain high in 2008, it is difficult to see otherwise when Bursa opens its CPO futures trading to global investors in 1H 2008.
So are we still nervous about plantation stocks?
No comments:
Post a Comment