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On safe ground

KUALA LUMPUR: ANALYSTS and plantation players have dismissed concerns of a major impact the flooding in the East Coast, the worst Malaysia has seen in decades, would have on palm oil output.

They said that for one, the three severely affected states — Kelantan, Terengganu and Pahang — are not major producing states.

Historically, Malaysia Palm Oil Board’s data have shown crude palm oil (CPO) output tend to trend downwards at the end of the year. 

In December 2013, CPO output was 1.67 million tonnes and in December 2012, it was 1.78 million tonnes.

“There are two key points here. The floodprone East Coast is not a major palm oil-producing area … and the December output is expected to trend lower month-on-month after Malaysia’s production peaked early in August this year,” Maybank Investment Bank Bhd research analyst, Ong Chee Ting, told Business Times yesterday.

“I think in 2015, palm oil supply growth is likely to be muted as planters are going to have a good harvest of 20 million tonnes of CPO this year. The supply concern for next year could buffer the downside in palm oil prices,” he added.

Earlier, a Reuters report sounded the alarm that the ongoing floods could reduce December’s CPO output by 18 per cent from last month’s 1.66 million tonnes, a bigger disruption than previously expected. 

Floods in the three states have, so far, displaced around 100,000 people.

Risks of supply cuts has fuelled bullish sentiment in palm oil prices. CPO futures on the Malaysian Derivatives Exchange yesterday continued its uptrend for two weeks, closing at RM2,250 per tonne as traders factored in December’s seasonally lower production.

Some people pointed out Felda Global Ventures Holdings Bhd (FGV) could be the biggest loser among big players from the ongoing floods in the East Coast as it owns more oil palm plantations there.

A source close to FGV, however, said while its estates may be affected by the rising waters, the damage is likely to be minimal as the estates are far from the flood-prone areas. “FGV has very few estates in Kelantan, which is the worst hit,” the source said.

FGV, the world’s largest CPO producer, has a planted area of 97,605ha in Pahang, 19,542ha in Kelantan and 11,448ha in Terengganu.

A Sime Darby spokesman said its plantation has not been affected.

National Association of Smallholders president Datuk Aliasak Ambia said its members had, so far, not reported any large losses. “Other than the private owners who have been affected by the floods, I have not heard of anything from big plantation firms, such as Felda in Machang, Kelantan,” Aliasak said.

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