DEMAND FOR CPO TO REMAIN ROBUST THIS YEAR

KUALA LUMPUR, Oct 13 (Bernama) -- Demand is expected to remain robust for
crude palm oil this year with India importing more palm oil to cover a shortage
in its oilseeds supply following a recent drought.

"Already the Soybean Processors Association of India is forecasting a 10.1
per cent decline for India's soybean 2009 production," Kenanga Research said in
its research note Tuesday.

It added that the global consumption for vegetable oil would also improve as
the world economy gains strength.

The research house said the near term crude palm oil (CPO) trade range will
be between RM2,100 and 2,300 per metric tonne (PMT) before rising further in
2010 as supply concerns set in.

"While CPO output should improve over the next two months, we continue to
believe that 2010 supply will remain sluggish with the impact of lower
fertilizer usage and El-Nino weighing in."

The research house also maintained a neutral view for the sector with
unchanged 2009 and 2010 CPO price assumption of RM2,200 PMT and RM2,400 PMT
respectively.

The research house favourite pick remained Kuala Lumpur Kepong (KLK) with a
target price of RM15.00.

KLK share price meanwhile ended Monday at RM14.08.

OSK Research also remained pessimistic on the price outlook for palm oil
next year, premised on strong growth in Indonesia's supply, a recovery in
Malaysia's production as well as record soybean planting in the US and South
America.

"Our average price assumption for CPO stands at RM1,900 per tonne against
RM2,150 this year," it said in its research note Tuesday.

"Amid an environment of declining CPO price and expensive valuation of
plantation stocks, we remain underweight on the plantation sector," it said.

OSK Research said Indonesia's production may be taking a breather.

Taking Astra Agro Lestari's production as a proxy to Indonesia, production
at the world's largest palm oil producer may be taking a breather right now
after a strong recovery in the past few months, it said.

Nevertheless, the research house said without the weather impact such as
that experienced this year, Indonesia's production is on track to hit another
record next year.

"This, we believe, will continue to put a lid on palm oil prices," it added.

OSK noted that further recovery in local production may also contribute to
the expected lower prices.

Output for September rose 4.2 per cent month-on-month, led by a recovery in
Sabah's production.

Sabah's production rose by 629,000 tonnes and Sarawak by 182,000 tonnes,
more than offsetting the 195,000-tonne decline in West Malaysia's production.

On the soybean factor, it said the commodity was still above the US$9
per bushel level (US1=RM3.39) amid uncertainty over the US harvest.

However, should there be no adverse weather, the US$9 level would again be
tested, and the selling pressure may increase with the start of the
planting season in South America.

It also said the cost per bushel was as low as US$5 for South Brazil.

"Compared to the current price, it is still very lucrative to plant
soybean," OSK Research said.

MIDF Research meanwhile expects CPO price to remain between RM2,050 PMT and
RM2,470 PMT during the remainder of the year despite recent weaknesses in
prices.

"Hence, we expect price to average at around RM2,260 PMT in the last quarter
of this year," it said.

At Monday's close, CPO price for October 2009, November 2009, December 2009
and January 2010 settled at RM2,193, RM2,164, RM2,147 and RM2,144 per tonne
respectively. (US$1=RM3.40)
--BERNAMA