Anglo-Eastern Plantations Doubts El Niño will Soon Boost Prices

Anglo-Eastern Plantation, which owns approximately 128,000 hectares of palm and rubber plantations in Indonesia and Malaysia, agrees that if the current El Niño follows the course predicted by meteorologists, it will cause adverse conditions for palm oil production in South East Asia, but the group does not foresee an El Niño driving up palm oil prices this year.

Although it is true that typically an El Niño weather pattern causes drought conditions in palm oil producing regions, resulting in smaller harvests, lower inventories, and higher prices, it is acknowledged that the impact from this El Niño may take until after 2015 to impact the industry.

Anglo-Eastern’s stance follows Australia’s Bureau of Meteorology noting growing evidence of a strengthening of the system in the tropical Pacific with atmospheric indicators showing a steady El Niño signal with sea surface temperatures exceeding El Niño thresholds at least into spring in the Southern Hemisphere.

In the first three months of 2015 Anglo-Eastern saw crude palm oil prices down 26% from the same time period a year before, due to expectations of high soyoil production after bumper soybean harvests in both South America and the U.S., and falling crude oil prices undercutting biofuel demand. Despite a strengthening El Niño, these trends are forecast to be the dominant palm oil price drivers for the balance of 2015.