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PO export ban lifted much to global mrkts delight. Whatever Widodo was advised to do its backfired! If he wanted CPO lower he's achieved that as the price has tumbled $210 since April.
Despite President Joko Widodo's tough stance on palm oil exports has cost the country hundreds of millions of dollars in lost revenue as the price of the edible oil has remained stubbornly above the desired 14,000 rupiah price which currently trades at R17,300 a litre.
Protests have been staged across the country and smallholder farmers group APKASINDO said since the announcement of the export ban the price of the fruit has dropped 70% below the floor price set by regional authorities and 25% of palm oil mills have ceased buying fruit from independent farmers severely hitting their incomes.
The Rupiah fell to a one year low last week despite an assurance from the Central Bank that it would stabilise the currency. The current ban on exports is costing the country c.$2bn each month it stays in place said Goldman Sachs.
Investors will have to wait for May's data to get a glimpse of the damage that's been done to revenues. Core inflation is running at c.3•5% but is manageable said the Bank.
Indian consumers are turning to Malaysia for their palm oil due to the erratic export policies of the Indonesian Govt. It's very likely that
Malaysia will emerge as the bigest supplier to India the world's top buyer of edible oils.
Malaysia intends to cut palm oil export taxes by c.50% which could see Indonesia's share fall to 35%, down from 75% a decade ago. Indonesia's dominance across S.E.Asia is now being threatened unless they lift the export tax ban.
Perhaps like parts of W.Africa low rainfall is impacting ffb's though I doubt it's the main reason for the drop from 208 in early April to current. That fall would include some hefty profit taking.
Should be an interesting day today with a rally of sorts in London. Hope it includes us!
Not sure why REA has been clobbered 24 since end of April but looks well oversold at that price. A late reported buy of 50,000 at 170 yesterday may steady the ship this morning.
London Palm Oil share prices at Wk18.
Ytd
------
Anglo (818) +15%
Dekel (4•85) +5%
Mpe (932) +16%
Rea (171) +22%
------
Cpo $1775 (+34%)
Anglo (854) +20%
Dekel (5•62) +18%
Mpe (944) +17%
Rea (175) +25%
Cif(R) ($1912) +31%
Cooking oils have doubled and olive oil is sky high as concerns over the flip flopping economic policy by the Indo Govt causes uncertainty in global mrkts. As of the 28th Indonesia will widen the export ban to include CPO. Palm olein is the most widely used cooking oil in the world and is now being purchase limited and price capped at ($0•93).
The export ban will last until domestic prices ease and is being used by the Govt as a form of crop protectionism.
As edible oil shortages increase globally, Govts are forced to protect their own food supplies.
Futures for July delivery surged by the 10% limit in KL and extended gains over night by a further 2%. London Palm Co share prices closed mixed on Thursday, Anglo up 7, Mpe off 25 & Rea added 3.
Big jump of $202 (CifR) to $1912.
Anglo +16%
Mpe +24%
Rea +27%
Ytd range.
Anglo 554-930 (825)
Mpe 670-1090 (995)
Rea 48-208 (178)
Indonesia's palm oil export ban is expected to last around 4 weeks due to lack of storage space for surplus oil and increased pressures from buyers to resume shipments.
Typically producers and processors produce twice as much as is consumed domestically. Once tanks are full mills are not able to process the ffbs and the fruit will rot and production drops.
Indonesia holds around 5m tonnes of oil stock out of a capacity of between 7-7mt with an annual domestic usage of c.18mt out of a total 51mt produced.
Banning cpo exports will certainly hurt producers. According to a leading palm oil farmers union expert said it could destroy the lucrative industry. While others say it was a necessary step for wider reform of the industry to devolve control from a handful of conglomerates to small farmers.
Whatever one thing is certain the poorest will be facing higher food costs through rising inflation and 'lay offs' on estates will add to unemployment. London palm shares have taken a beating, REA off 15% this week in response to the global uncertainty of output and prices.
April 28th will see Indonesia's clampdown come into effect prohibiting exports of palm oil as the country prioritises the domestic mrkt following protests over high food prices.
However their is much scepticism among traders that the ban will hold as it seems the ban will extend to bulk purchases and packaged RDB palm olein only.
Meanwhile the Indonesian Central Bank cuts growth forecasts but holds rates at 3•5%. Cif Rotterdam prices tumbled yesterday to $1665. UK shares of palm oil companies tumbled, MPE tanking 93, REA 9 but bucking the trend Anglo added 46.
Two late reported trades of 25k (190) and 40k (192) way above current sp skews current pricing. Along with cancelled trades its becoming a major bugbear for investors.
Won't be long before trades don't get reported at all and all trades will be conducted in private among high rollers with inevitable consequences for investors in the real time world.
Indonesia's ban on exports of palm oil from April 28th due to domestic shortages will hit India and other countries badly. The local price has soared from 14k rupiah to 22k rupiah as people stockpile oil.
The ban will mean India will lose c.4mt of palm oil every month coming at the worst possible time of rising costs and inflation. Indonesias supply is impossible to replace and its unlikely Malaysia will be able to fill in due to pandemic induced labour shortages.
Adding to woes palm oil futures soared to their highest level since March. Indos palm oil ban threatens stoking global food inflation. Current cif Rotterdam price $1785.
Yea, it's good and bad in parts and I expect the mrkt to take a dim view. Not sure about Ukraine planting next April but at least we're starting ext planting and need to get a hurry up as I agree the cpo price could come under pressure if China & India cut back. As ever things move at a slow pace but a return to profits is welcome
despite worries what our landlord plans to extract from us in biotaxes etc...Still a hold imo.
"A better looking set of nos reported by REA"
Yes, JL, but the tax charge is over 60%! Another negative eps figure again. A lot of it is fluffy stuff - intentions to do extension planting, expectation to sell a million tonnes of stone over 2 years, etc. All a bit disappointing. The high CPO prices will drop off next year when Ukraine plants a sunflower crop next April, I wonder? Coal prices can't possibly stay above $300 a tonne for long, surely? We need $24.3m to deal with the pref arrears and pref divs due this year, and that's to just stand still. JMV.
A better looking set of nos reported by REA in respect of 2021 trading, which has cont into Q1 (2022).
Revs $192m ($139m)
GP $62•1m
PBT $29•2m
NP $9•3m ($16m L)
Nav $246m
Nav £189m
Nav 430p
Group debt reduced to $176m
(£135m) equates to 307pps or 71% of shareholder funds.
Morning NB. For sure, nevertheless I still think I should have dug my heels in and not cashed in my chips....going for Gold hasn't worked out well atm and as usual find myself stuck in a 28% loser not to mention 100p losses on my REA trades. The grass is def no greener in WA.
Much to my surprise REA is outperforming AEP & MPE in ytd sp terms (not that it means much) and no way could I have forecast that. A touch at Donny has given me some ammo...now is it to be AEP or MPE. AEP don't seem that shareholder friendly and buying MPE on take-over hopes doesnt work for me as I'm not sure an offer of £12+ is on the cards so the upside may stall around current. I'm not bothered about dividends.
Of course I could add to REA or throw more money down a deep hole in WA.
Any views NB?
"Whatever the Co does the F/Y nos will be one of the more interesting REA has
reported for many a year..." Agreed.
Not stupid to sell out - nobody could have foreseen the huge rise in the price of CPO and coal, and nor could they have foreseen the Ukraine invasion and the anticipated disruption to sunflower oil production. The only clue maybe was a comment in one of the annual reports that CPO had been trading below its 10 year average for some time. ATB.
Hi nobull, yea a minefield forecasting REA nos given the scope to as you say..." being miles out"... I can't see REA paying off the pref arrears in one hit, not much point imo. If we get $1000 emg price would be better than I hoped for but REA have disappointed too many times in the past for my liking. However I'm turning a profit having stupidly sold out c.60-70 so must'nt moan too much and intend to hold for the foreseeable.
Whatever the Co does the F/Y nos will be one of the more interesting REA has
reported for many a year.....fingers crossed revs will hit c.$200m.
I wouldn't trust my own forecast in a million years on this stock: the combined leverage is so high that one small mistake in the revenue figure could leave the eps figure out by miles; also, the size of the pref div arrears chosen to be paid is a finance cost that reduces eps attrib to the ords, so you might have to guess right the amount of pref. arrears they will pay too, I wonder, to be anywhere near close to getting the eps attrib to the ords right.
One poster on RE.B thinks they might pay all £12.24m (72m x 17p) or $16m of arrears this year. With a $1700 CIF Rotterdam price, one would hope we were getting $1,000 ex-mill gate after the dreadful $375 Export Levy and $200 Export Tax and $100 imagined freight cost to Rotterdam, which would be higher than the average ex-mill gate price we got for FY2021, and yes, this high ex-mill gate price might make it possible to pay off all the pref. arrears at once, but I can't imagine they could turn a profit on the ords if they do that. Fingers crossed they are exploiting the high coal prices and have started to sell andesite.
Indonesian palm oil companies share prices have been given a boost due to problems with sourcing sun flower oil from Ukraine. Mpe has risen 150+ this last month with similar % rises seen in ultra cautious Anglo and REA.
REA reports F/Y nos towards end of April which will be materially better than a year ago after accounting of the usual (too much rain, roads damaged, fire damaged boiler), Covid, etc which is the cost of doing business in unpredictable weather stations. Reducing debt and settling some of the loans is ongoing while the stone and coal interests should start to make a contribution of sorts having done sfa for years.
I think nobull forecast an eps of c.8p for 2021 and I wouldn't disagree though i suspect he is being extremely cautious given the rise in cpo this year which could average out some $200 more than 2020. You never know the bottom line might turn blue, stranger things have happened.
Currently 83% of the outstanding is held by investors with over 4%.
Back in for a few shares pre F/Y results.
Shares went up too fast and we're due a pull back. No doubt the greedy Govt will be picking the pockets of overseas palm companies, so factor that into any purchase of REA. Whatever the results should be on the stellar side for a change!