CPO prices to get full La Nina effect by end-May

PETALING JAYA: Crude palm oil (CPO) prices will get the full impact of the rising La Nina weather risks, which are threatening major oilseeds and grain growing areas in the US and South America, by end-May 2009.

La Nina, usually marked by wet weather and abnormal heavy rainfall, was expected to disrupt the 2009 planting season for oilseeds and grains like soybean and corn in the US in March and April, a plantation industry consultant told StarBiz.

He said La Nina could also affect the harvesting season for soybean in Brazil and Argentina from February to April.

“All will depend on the length (time frame) of the La Nina weather pattern in 2009,” the consultant added.

He expects any disruption in planting or harvesting of soybean crops in 2009 would help bolster the currently-weak prices in most agriculture-based commodities, including CPO.

The world encountered a lengthy La Nina phenomenon from 1998 to 2001.

In 2001, it was reported that US farmers planted 1.6% less acreage of soybean and 4.8% less acreage of corn due to the wet weather caused by La Nina.

An analyst with a bank-backed brokerage said that increasing weather volatilities worldwide such as heavy rainfall in South-East Asia and drought in Australia last year led world markets to raise the risk premium for agricultural commodities.

In Malaysia, he said, abnormal heavy rainfall early last year created floods in major oil palm plantation areas like Johor and Pahang, giving a short-term boost in CPO prices.

Meanwhile, plantation stocks were traded higher on Bursa Malaysia yesterday as the CPO price closed above RM1,600 per tonne in line with soybean oil gains on the overnight Chicago Board of Trade.

Plantation giant IOI Corp Bhd closed eight sen higher at RM3.58 while Kuala Lumpur Kepong Bhd and Sime Darby Bhd both rose 10 sen to RM8.85 and RM5.20, respectively.

United Plantations Bhd increased 20 sen to RM10.60 and Asiatic Development Bhd was 10 sen higher at RM3.52.

On Bursa Malaysia Derivatives, the benchmark CPO for March delivery closed RM81 higher at RM1,671 per tonne.

The Star- Hanim Adnan