Sipef ramps up palm oil sales, foreseeing drop in prices ahead


Plantations group Sipef revealed it had ramped up its pace of hedging forward its palm oil production, flagging a recovery in industry output which is expected to weigh on prices.

Sipef said it had sold 41% of its projected palm oil production for 2017, for an average price of $788 a tonne.

This compares with just 27% of projected volumes sold, at $649 a tonne, at this point a year ago.

"We want to keep taking advantage of current market trends and continue to steadily put our volumes on the market," Sipef said.

Falling prices

The company forecast prices to fall, thanks to rising recovery in the middle of 2017, as production bounces back from the 2015-16 El Nino drought.

"The palm oil market is currently in its low production cycle and it is expected that somewhere during the second semester of 2017 we will see a very strong production recovery with high yields," Sipef said.

Sipef's production is already starting to recover, with palm oil output in the last three months of 2017 reported at 86,783 tonnes, compared to 77,307 tonnes year ago.

"After an extremely weak palm oil production in the third quarter, in which the delayed effects of the El Nino drought of 2015 were experienced at their strongest, we returned to growing volumes in the fourth quarter," the company said.

Price pressure

This increase in production, replicated across south-east asia, will weigh on prices, Sipef said.  

"The forward prices are already reflecting a massive discount."

But prices will remain supported until the middle of the year, Sipef said, as the market "is battling with very low stocks in the origin and the destination, and customers are forced to buy for their immediate needs".

Shares rise

Sipef reported full-year 2016 revenues at $267.0m, up 18% year-on-year.

The company reported operating profits up 120% year-on-year, at $47.5m.

Sipef shares in Brussels were up 1.0%, at E64.12, in afternoon deals.


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