Will Singapore plantations’ production continue to wither in 2016?

The dry weather’s effects are still being felt.

Plantations can bid farewell to the last effects of the prolonged dry weather, as analysts say production and average selling prices (ASP) should bloom again this year.

According to a report by UOB Kay Hian, production recovery is expected to gain traction only in late 3Q16, due partly to the lagged impact from the prolonged dry weather which will continue to hurt production in 2Q16.

On the flip side, rainfall has been good in central and west Kalimantan since late November 2015, indicating less stress on trees.

Overall, production should pick up slightly in Q2, and peak in late Q3. Plantations with younger age profile will see a stronger production recovery than those with older age profiles, as older trees are severely impacted by the dry weather and will be slower in seeing a rally in production.

Meanwhile, ASP should start inching up from Q2. Palm prices only started trending up from March and realised prices in Indonesia usually lag by a month, thus higher prices from March onwards will be reflected in Q2 results.

However, as there was no export duty in the same period in 2015, the price increment will not be fully seen in Q2 this year—much of the high-price impact or more comparable pricing will come only in the second half of 2016.

Further, Indonesia’s new export duty on palm production was effective 15 July 2015, and the funds collected will be to fund the biodiesel mandate, replanting for smallholders and for research and development.