Like most commodities, palm oil price also moves in cycle. There are several reasons why commodity price is cyclical in nature. The price of any product depends largely on the theory of supply and demand which also depends on other economic factors such as economic expansion, recession, interest rate and other factors, all of which are also cyclical in nature.
A few weeks ago, I posted an article under the title ‘Palm Oil Price Trend’ on this forum where I said the average CPO price was Rm 2,250 for last year per ton and in the recent Malaysian Palm Oil conference, all the experts expect CPO price to rise to Rm 3,000 soon. The average CPO price for this year will most likely be about Rm 2,750 per ton. As a result, all plantation companies will enjoy an additional profit of RM 500 per ton for no additional effort, literally for doing nothing.
As we all know, due to the poor CPO price for last year, the share price for all plantation companies have been depressed. Most of them are on cheap sale.
Since the CPO price is at the beginning of the uptrend cycle, all plantation companies will show increasing quarterly profit in the next several quarters.
About 80% of my total investment is on the plantation sector. I have Kulim, FGV, SOP, TH Plantation and Jaya Tiasa and their closing prices are Rm 3.40, 4.46, 6.40, 2.00 and 2.75 respectively. I must warn you that if you decide to buy, you are doing it at your own risk.