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Macquarie expects edible-oils
to remain significant underperformers among agri-commodities, diverging from
grain and oilseed prices' meteoric rise, due to soyoil's decline in value share
in soybeans, indicating edible-oil fundamentals aren't as tight as meal
fundamentals.
It expects the CPO-soy price discount could widen further over the
next three months, given CPO's seasonal production recovery.
Slowing biodiesel
demand is also weakening edible oils, partly on crude-oil price declines, it
says.
"We view the edible oils market as well-supplied, despite likelihood of a
poor U.S. soy crop, especially in light of slowing demand. Should these demand
fundamentals remain unchanged and no new weather-related supply issues develop,
we believe that the coming year could be a surplus year for CPO."
It expects
plantation-sector players' earnings to be below street estimates given sharp CPO
and palm-kernel price falls during the quarter. Its top picks are Sime Darby
(4197.KU) for its non-plantation businesses, First Resources (EB5.SG) for strong
production growth and London Sumatra (LSIP.JK) for potential positive earnings
surprise.
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