In  its  latest  advisory  on  14  May  2015,  the  US  National  Oceanic  and Atmosphere Administration said that “(N)early all models predict El Niño to continue  throughout  2015  and  many  are  also  predicting  sea  surface temperature  anomalies  to  increase  during  the  next  several  months”  and “(c)ollectively,  these (climatic)  features  reflect  weak  to  moderate  strength El Niño conditions”. It however added that “model forecast skill tends to be lower  during  the  Northern  Hemisphere  spring,  which  somewhat  limits confidence in these forecasts.” (Source: CPC, US NOAA)

Comments:  What  is  notable  is  that  the  latest  NOAA  advisory  said  that collectively,  climatic  features  reflect  weak  to  moderate  strength  El  Niño conditions  instead  of  just  weak  El  Niño  conditions  as  in  the  9  April advisory.  Given  this  and  the  Australian  meteorological  forecast  last Tuesday of “quite a substantial El Niño event” this year, weather conditions as well as vegetable oil supply (including US soybean planting  intentions and  progress)  will  have  a  strong  bearing  on  CPO  prices  in  the  coming months.

We maintain our NEUTRAL  sector weighting based on CPO ASP forecast of RM2,400/MT for 2015E and RM2,500/MT for 2016E-17E.

Source: Affin Hwang Capital Research - 15 May 2015