Get Ready, CPO Issuers Will Get Fresh Wind From El Nino

JAKARTA - PT Mirae Asset Sekuritas Indonesia predicts that the performance of CPO issuers will get fresh air from rising palm oil hargga. This is due to the prolonged dry dry season as a result of the dry weather phenomenon, namely El Nino.

Research Analyst Mirae Asset Rizkia Darmawan said El Nino is predicted to suppress the operational performance of oil palm plantations, but the delay in production will make the world's crude palm oil (CPO) price potentially lifted due to the decline in production.

"El Nino's phenomenon affects the demand for world vegetable oil, one of which is CPO because its production or supply has fallen at the global level and then boosted the price of these commodities in the market," Darma said in Media Day: September 2023, Tuesday, September 12, 2023.

He said the CPO price had risen to around RM3,800 per tonne from June to the last few days. Since the beginning of the year, the average CPO price has been in the range of RM3,900 per tonne and has fallen by about 12 percent, down to the range of RM3,300 per tonne in June but rose again until the beginning of this month.

Another factor, he continued, is that the price of CPO is still lower than other vegetable oil prices such as metapa oil (rapeseed), soybean oil, and solar seed oil. So there is a possibility that demand for CPO will also increase.

Most CPO issuers, he continued, will receive a positive impact from rising commodity prices that fall into the category of foodstuffs (soft commodity).

El Nino's impact is predicted to still occur and it is predicted that the CPO price will rise again until the end of the year, but it is very unlikely that it will return to the top level of RM4,600 per ton (around US$1,000 per ton) as in the range of 2021-2022.

However, there are several risks to the prediction of an increase in CPO commodity prices, namely the amount of production that will be disrupted due to the El Nino weather effect and government policy factors to maintain the stability of domestic cooking oil prices amid the increase in global CPO prices.

The effect of the increase in CPO prices will also occur in several CPO issuers which are the scope of Mirae Asset research. Some of the issuers covered, namely: - PT PP London Sumatra Indonesia Tbk (LSIP) recommendations for Trading BUY, TP Rp 1,180 for the next 12 months, - PT Astra Agro Lestari Tbk (AALI) recommendations for holding with TP Rp8,250, and - PT Nusantara Sawit Sejahtera Tbk (NSSS).