Agri firms to suffer 15% tumble in fresh fruit production

Delayed El Niño effects are still damaging the sector in 2H16.

Singapore-listed agribusiness companies, Bumitama Agri, Golden Agri-Resources, Wilmar, and First Resources, are still expecting low FFB production in 2H16 as lagged effects of El Nino threatens to dry up production.

UOB Kay Hian revealed that companies slashed 15% YoY in their 2H16 FFB production outlook. It worsened by 10ppt from previous forecast. Bumitama Agri adjusted its guidance by the most and is now expecting 2016 FFB production to decline 5-10% YoY (+8 YoY previously). Plantation companies including Golden Agri-Resource, Wilmar, and First Resources also revised down their FFB nucleus production guidance as the FFB production recovery has been slower than expected.

“Most of the companies indicated that FFB production remained weak in July, affected by the one-week Eid Fitr holidays. We understand the rainfall has normalised in 1H16. However, the lagged impact from the El Nino will still suppress yields,” UOB Kay Hian explained.

For 1H16, most of the companies’ FFB yields plunged 18.8-32.5% YoY. FFB production will only pick up from Sep 16 to Dec 16, and about 60% of the year’s production will be harvested in 2H16, UOB Kay Hian said.