Malaysian palm oil exports up. According to independent surveyor SGS yesterday, Malaysia’s palm oil exports rose 19.8% MoM in the first 15 days of March, from 494,170 tonnes to 592,07 tonnes. However, during a recent palm oil conference held in Malaysia, some industry experts expect CPO futures prices to come under pressure in 2H09 due to an increase in FFB production, weaker soybean oil prices and weakening demand from countries like India (due to slowing economic growth).

Rising soybean oil stock could be price dampener. According to a USDA report released over the weekend, US inventories of soybean oil are already piling up due to weakening demand. Soybean oil stocks as at end Jan was 2.9b pounds, up around 9% from Dec’s 2.65b pounds. One factor that can cause further weakening in demand is the European Commission imposing anti- dumping and countervailing duties on US firms that export biodiesel (commencing 13 Mar). Thus, US production and exports of biodiesel are likely to contract substantially. Should a build-up in stock continues, it could be a dampener on soy oil prices.

OPEC holds off cuts, caused easing of crude oil price. OPEC held their meeting last Sunday, with some industry analysts expecting them to slash production in an attempt to push up crude oil prices. However, the cartel (which pumps approximately 40% of the world’s crude oil), have decided to put on hold any further cuts and hold output steady at the current level of 25.5m bbl/day until the next meeting on 28 May. This was in view of the G20 leaders meeting on 2 April to discuss measures on how to tackle the world economic slowdown. At the last OPEC meeting in Dec 08, OPEC cut a record 2.2m bbl/day, bringing total cuts over three meetings to 4.2m bbl/day. We maintain our CPO price assumption of RM1,500/tonne for FY09 and RM1,900/tonne for FY10 (versus current CPO futures of RM2,011/tonne for April delivery). Based on this, Indofood Agri Resources (IFAR) remains a NEUTRAL with target price S$0.51 and First Resources (FR) is a SELL with target price S$0.21.