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Jumat, 01 April 2011

ASEAN Plantations - USDA prospective plantings - soybean loses acreage share to corn, but within expectations - ALERT - JP Morgan

• USDA prospective planting report for 2011 just announced: Corn’s acreage will increase 4.5% to 92.178MM acres (consensus: 91.8MM acres), soybean’s will decline slightly by 1% to 76.609MM acres (consensus: 76.9MM acres), while wheat’s will climb 8.2% to 58.021 acres (expectations: 57.5MM acres).

• Market has already been expecting corn to win acreage share at the expense of soybean, though the corn acreage planting (and also wheat) was slightly ahead of expectations by 0.4% (0.38MM acres), while the soybean acreage planting was slightly below expectations, also by 0.4% (0.29MM acres).

• Overall impact: The data above is positive for soybean prices due to the slightly reduced plantings against falling stock-usage levels (stock usage for soybean forecast to fall over 2010-11E from 4.5% to 3.9% in the US and from 25% to 21% globally). However, this is unlikely to lead to a material re-rating in soybean prices, in our view, as the plantings for soybean do not differ significantly from expectations. Our US team remains positive on the outlook for soybean and soy-oil prices, with the latter to be driven also by bio-diesel mandates (i.e. RFS 2 in the US), which will lend support in prices near these levels (our in-house soybean price forecast at US$14.68/bushel for 2011E versus spot of US$13.78/bushel, YTD: US$13.87/bushel).

• Impact on palm oil: Supportive soybean oil prices will help lend some support to palm oil prices amid expectations of rising global CPO production by 2H11 (Global CPO output expected to rise by 2.5-3MT in 2011E versus an increase of just 0.5MT in 2010). Hence, palm oil’s price discount to soy-oil will widen as production picks-up. To some extent, this is already happening or being priced-in as the discount has widened to US$150/t currently from zero discount earlier in the year (versus historical mean discount of US$160/t and peak discount of US$260/t).
Also, our new higher in-house forecast for crude oil of US$110/bbl for 2011E provides a floor support of M$3,100/t for palm oil.

• Stock calls. While downside in CPO prices, we believe, is increasingly limited near these spot levels of M$3,344/t following the 15% correction in prices from its high of over M$3,900/t in Jan-11, we see limited catalysts for upside for now until inventory levels peak sometime in 2H11. Our CPO forecast is M$3,400/t in 2011E and M$3,200/t in 2012E (YTD: M$3,650/t). We remain selective with Sime Darby (non-CPO
price drivers, positive risk-reward at current levels, growth) and First Resources (value and growth) as our top picks. We are Neutral or Underweight on most of the rest of our ASEAN stock universe.

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