By Ashley Tang
Palm oil prices could rise in the second half of the year if the El Nino weather phenomenon significantly affects supplies, pushing prices out of a tight range expected this year, the CEO of Malaysia's SD Guthrie MYX:SDG said on Thursday.
SD Guthrie, one of the world's largest producers of palm oil, expects prices to range between 4,400 ringgit ($1,081) and 4,700 ringgit this year, with upside capped by competition from soybean oil.
The benchmark palm oil contract (FCPOc3) for August delivery on the Bursa Malaysia Derivatives Exchange was trading at 4,568 ringgit a metric ton on Thursday.
"El Nino's impact is currently being felt more severely in Malaysia than in Kalimantan, which is the opposite of the last El Nino," Chief Executive Mohd Haris Mohd Arshad told a press conference.
He added that the company was doing its best to improve water management to cope with any potential dry weather spells.
Mohd Haris also said SD Guthrie MYX:SDG was working with the Indonesian government on the issue of land seizures affecting some of its palm oil plantations.
About a third of the company's land bank is located in Indonesia and Mohd Haris said 2% of it - amounting to around 2,800 hectares - was seized by a task force set up by the government in Jakarta last year to crack down on violations in the palm oil industry.
The task force, consisting of the military, the police and state prosecutors, has seized around 4.1 million hectares of plantations for operating illegally in forest areas.
Mohd Haris said Jakarta's revenue-sharing arrangement was not commercially viable as plantation margins were low.
Meanwhile, Chief Financial Officer Shahrizal Suhainy said SD Guthrie was not too worried by high fertiliser costs arising from a supply crunch caused by the , as it procures its supplies from China, Canada, Belarus, and Egypt, and has already locked in prices for the year.
($1 = 4.0680 ringgit)