KUALA LUMPUR, Sept 21 — IJM Plantations Bhd (IJMP) is cautiously optimistic of its 2021 outlook due to lingering uncertainties in the palm oil global market.
Its chief executive officer and managing director, Joseph Tek Choon Yee said although the current crude palm oil (CPO) prices remain bullish, there could be a potential pullback in prices amid pressure from year-end rising stock levels.
“This is in line with palm oil production potentially outweighing total exports and consumption. However, many planters are in substantial shortage of workers and this hampers operations, especially during the seasonal peak crop, affecting crop recovery from the trees,” he said after the upstream palm oil plantations company’s 35th annual general meeting in Petaling Jaya today.
Tek said IJMP, which has upstream operations in Malaysia and Indonesia, is of the view that its overall crop production, as well as CPO production may end up lower this financial year compared with last year’s.
“This may also be a common trend across the palm oil industry over the same period. As per the Malaysian Palm Oil Board (MPOB) report, crop production in Malaysia for the first seven months in 2020 is trailing behind last year’s by 671,619 mt or 5.8 per cent.
“IJMP views that crop output in top producing countries during the expected year-end peak production could further disappoint,” he added.
Tek said the lesser crop production was due to dry weather in both Malaysia and Indonesia from August to November last year, and the upcoming La Nina phenomenon from September to November this year.
He said operations, such as harvesting to crop evacuation as well as palm product quality, will be hampered during the wet season,
“Ultimately, Malaysia’s CPO output may not cross 20 million tonnes, while Indonesia’s CPO production in 2020 has been forecast by many analysts to be lower by one to two million tonnes from last year’s 44 million tonnes,” he said.
On the other hand, Tek said global demand for palm oil is poised to recover, thanks to the easing of COVID-19 lockdowns across the globe, with major consumers such as China and India returning to the market.
“An added push to use more palm oil in biofuels, particularly by Indonesia, will augur well towards lowering stocks and increase the price but this will be correlated to crude oil prices.
“Stronger crude oil makes palm oil a more attractive option as a biodiesel feedstock.
“Indonesia recently announced it may further increase palm oil export levies to support its ambitious biodiesel programme as the price of crude oil is expected to remain weak,” he said.
For the first quarter of the financial year 2021 ending June 30, the plantation giant projects a net profit of RM82.16 million against a deficit of RM4.77 million in the same period last year.
Revenue, meanwhile, stood at RM205.98 million compared with RM133.06 million last year.