News

November 12, 2008

New Britain Palm Oil Has A Lot Going For It Despite The Weak Price Of Palm Oil

Sally White

Who’d be an analyst? Trying to forecast the standard two year views and more for the likes of AIM listed New Britain Palm Oil (NBPOL) and other agriculture groups is probably impossible to get right! The component parts of the sums are plummeting palm markets, unknown demand levels, rising stocks and supplies, falling shipping prices, reneging Asian buyers, variable finance costs, falling energy prices… At least all the vital “fs”are falling – cost of finance, fertiliser and freight! For a smart well-hedged group like NBPOL, with forward sales locked in, this year may not be such a problem, especially as we’re three-quarters through. For the rest, it is no wonder that Kaupthing Singer & Friedlander prefers to give an illustrative view!

The benchmark January 2009 palm oil contract on the Bursa Malaysia Derivatives Exchange has fallen by more than  two-thirds from  June’s peak of 4,486 riggit/tonne to the current price of 1,622 ringgit (US$457). There are gloomy expectations of it going down further, maybe to 1,200 ringgits. Although most of the UK-quoted plantation sector have in the past talked of costs of around US$280 a tonne, all parts of the equations are now moving up and down as fast as strobe lights....