• Stay NEUTRAL; Top Picks: Ta Ann, Sarawak Oil Palms (SOP), Bumitama Agri and PP London Sumatra Indonesia (LSIP). Most speakers at the 2024 annual Palm & Lauric Oils Price Outlook Conference & Exhibition (POC 2024) declined to give average price forecasts for the year. We note, however, that most expect CPO prices to be buoyant in 1H24, before moderating in 2H24 – similar to our view. The price projection range was wide, ranging between MYR3,800 and MYR4,700 per tonne. We continue to advocate buying shares of the pure planters, for sector exposure.

• Most speakers declined to commit to an average price for the year, with only seven providing price forecasts. We note that views were relatively uniform in the expectation that prices would be higher in the next few months, before moderating in 2H24. Of the seven price forecasts, Dr Sathia Varga, Thomas Mielke, Nagaraj Meda and Rasheed Janmohammed had more measured views, while Dr Julian McGill, Dr Fadhil Hasan and Dorab Mistry were more bullish. The more measured neutral price forecasts ranged MYR3,800-4,200 per tonne, while the more bullish price projections were between MYR4,200 and MYR4,700 per tonne.

• Declining yields and sustainability still an issue. A lot of discussions revolved around the need to address declining yields, mechanisation and sustainability requirements. Most speakers believe that long-term supply is at risk if palm oil yields do not improve, while sustainability is an issue with the still-rising Brazilian soy crop acreage.

• Going forward, the main factors to watch out for are: i) The impact of weather on US crops, particularly if La Nina emerges; ii) any changes in global biofuel policies, iii) the developments in the Black Sea and the Red Sea, and iv) Indonesian policy changes, with a new president on board. New, more exciting changes could also come in the form of new sustainable aviation fuel (SAF) and marine biofuel policies, which would boost long-term demand further.

• Maintain sector NEUTRAL. We make no changes to our CPO price assumption of MYR3,900/tonne for 2023. The main risks to our sector weighting would be weather extremities, and policy changes in Indonesia. We advocate investors to continue leaning towards pure planters like Ta Ann and SOP (in Malaysia), Bumitama Agri (in Singapore) and LSIP (in Indonesia).

Source: RHB Securities Research - 7 Mar 2024