Here's how badly Singapore agribusiness players were hurt by weak CPO prices

Prices crashed by 25%.

According to OCBC Investment Research, most CPO (crude palm oil) companies reported fairly disappointing 1H13 results recently, no doubt hurt by weaker CPO prices in 2Q13 (CPO prices fell 25% YoY and another 5% QoQ).

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Under our coverage, Golden Agri’s (GAR) 1H13 earnings only met about 34% of our full-year forecast. Global Palm Resources (GPR) was even harder hit, as its 1H net profit met just 27% of our fullyear forecast.

Wilmar International Limited (WIL) fared slightly better, with 1H13 core earnings meeting 40% of our FY13 forecast, as its substantial downstream business helped to mitigate the poorer upstream showing.

Outlook for CPO prices still quite muted
But going forward, the outlook for CPO prices remains largely muted, given the sluggish economy in China (one of the biggest buyers of CPO and other vegetable oils), while even Indonesia’s economy1 could be facing increased headwinds due to reduced spending power on the back of a higherthan-expected spike in inflation and a sharp
weakening in the IDR1.

On the supply side, things are not looking too good either – CPO production as well as the other vegetable oil substitutes are expected to increase in 2H13.

Based on current estimates, market watchers like Oil World1 believe that “world production is likely to exceed demand”.

The Hamburgbased industry researcher adds that there is little scope for more growth in demand for vegetable oils to make biodiesel, citing unchanged biodiesel mandates in the EU and “hesitatingly” implemented increases in Brazil and Argentina1.