Dear friends of i3 Forum,

This evening we will post our reasons WHY PALM OIL UPSTREAM PLANTERS WILL BENEFIT MORE THAN DOWN STREAM PALM OIL COMPANIES WHEN CPO PRICES ARE HIGH.

Let us illustrate by these EXAMPLES

There was a time when Cost of Cpo production was Rm1,600 a metric ton. And Market price for CPO was Rm2,400 MT and a 5KG Cooking Oil cost Rm19.90

Above scenario tells us Pure Upstream planters (involve in FFB harvest ) will lose out to Down Stream Palm oil Companies that process FFB & CPO into Cooking Oil for sale

Why Upstream no good and down stream better when Cpo prices are low at Rm2,400 Per Metric Ton

OK Let us do a calculation

1. THE UPSTREAM PLANTERS LIKE JAYA TIASA, INNOPRISE PLANT, BPLANT, THPLANT, TSH RESOURCES, UTD PLANT AND MANY OTHERS ONLY PLANT AND HARVEST FFB (Fresh Fruit Branches) For Sale

Cost of Cpo Production Rm1600

Selling at Rm2,400

Profit is 2,400 minus Rm1,600 = Rm800

Rm800 divides by Cost Rm1,600

= 50% Gross Profit (Fertilizer, labour overhead not included)

2. THE DOWNSTREAM PALM OIL COMPANIES THAT PURCHASE FFB & PROCESS THEM INTO COOKING OIL AND OTHERS FOR SALE TO CONSUMERS LIKE YOU AND ME IN SUPERMARKETS, MINIMARTS & HYPER MARKETS

Their Cost of Purchase Rm2,400 Per Metric

Cost is Rm2.40 per litre (kg)

So in 5 Litre Plastic Bottle

it will be Rm2.40 cost X 5

= Rm12.00 for 5 Kg

And before MCO lock down they Sell a 5Kg Bottle cooking oil for Rm19.90

Now Sale is Rm19.90

Cost Rm12.00

Gross profit?

Rm19.90 less Rm12.00

= Rm7.90

Divide by Cost Rm12.00

So Rm7.90/Rm12.00

= 65% Gross profit

DO YOU "SEE" THE DIFFERENCE?

Planters gross profit = 50%

Processer into Cooking Oil gross profit = 65%

So from above we "SEE" that when prices of Palm oil is cheap companies like Wilmar, KLK, Batu Kawan, IOI CORP and others in Downstream are doing well. Those in upstream after deducting cost plus paying off bank loans are fairing less well

NOW SEE THE NEW SCENARIO WHEN CPO PRICES ARE HIGH LIKE NOW SEE

CRUDE PALM OIL FUTURES

Continuous contract

FCPO1!

Bursa Malaysia

​

​

Price Section

Wholesale