- Newsflow in the plantation sector last week were in respect of USDA’s (US Department of Agriculture) supply and demand estimates for soybean and the latest updates on the fires in Sumatra. Yesterday, independent cargo surveyors reported that Malaysian palm oil shipments fell 23% to 24% in the first 15 days of July compared with the same period in June.

- According to USDA’s latest report, ending global inventory of soybean is forecast to climb 20.5% to 74.1mil tonnes in 2013F/2014F underpinned mainly by rising production in the USA.

- Soybean production in the US is estimated to expand 13.4% to 3.4bil bushels in 2013F/2014F on the back of a recovery in yields after being hit by the drought in 2012/2013F. Ending inventory of soybean in the US is forecast to increase 136% from 125mil bushels in 2012/2013F to 295mil bushels in 2013F/2014F.

- In spite of the increase in soybean supply in the US, supply of CPO in Malaysia and Indonesia is expected to remain tight until the peak output season commences in August or September 2013. CPO inventory stood at 1.65mil tonnes as at end-June 2013 versus the five-year average of 1.85mil tonnes.

- Based on the latest prices, discount between soybean oil and CPO is 29% or US$297/tonne against the average of 17.4% in June 2013. Soybean price fell 2.6% last Friday while CPO price slid 3.1%.

- According to SGS, the fall in palm oil shipments in the first 15 days of July was due to fewer purchases from China, India and the US. There were 34.6% fewer shipments going to India in the period of 1-15 July compared with the same period in June while the US bought 64.9% less. Palm oil shipments heading to China slid 36.6% in the first 15 days of July.

- Last week, Jakarta Post reported that Kuala Lumpur Kepong Bhd (KLK) has been named as a suspect in the forest fires in Riau. Subsequently, KLK issued a press statement saying that its subsidiary, PT Adei has been cleared by Kepala Dinas Perkebunan Propinsi Riau.

- Dr H. Zulher, Kepala Perkebunan Propinsi Riau and his team visited PT Adei’s Nilo complex on 25 June 2013. He said that the claims of slash and burn method were unfounded. He added that the fire started in an area slated for conservation purposes but which the community living within the vicinity, was trying to clear for cultivation. PT Adei had in fact taken quick action to help douse the fire.

- We remain positive on the plantation sector. Presently, we have BUYs on Genting Plantations, IJM Plantations, TSH Resources and KL Kepong.

Source: AmeSecurities