friends, fellow golfers and even my wife.   My response was you should read my Blog earlier Blog posts about palm oil prices.

Tomorrow is an important day for palm oil as Malaysia is supposed to release some production data on the June figues.  Expectations are for a bumper crop so prices could fall further.  At the point of writing - crude palm oil was trading at about M$2002 per tonne (see chart below).   With further weakness expected in crude oil prices and an expected bumper crop, we could see palm oil prices fall further......our analyst Chong Yi mentioned to me this morning that a technical level was about M$1750 per tonne if the M$2000 per tonne doesnt hole.

Crude palm oil price chart

Crude oil price chart

Crude oil is also sitting at a support level and if the macro economic numbers look weak in terms of demand could fall another 10-20%.

The weakness in crude oil and crude palm oil prices has led to brokers and analysts revising or changing their recommendations.  I noticed more sell calls for plantation stocks in Malaysia such as KLK and Sime Darby.  Even Golden Agri - is seeing some sell calls emerge in the last few weeks and this probably accounted for the weakness in the share price.

Golden Agri - share price chart

Golden Agri - technical indicators (RSI/MACD)

RSI still trending down but the over-bought position when the RSI was near 70 has corrected nicely.  I would wait for tomorrow's CPO production figures for Malaysia first before taking any action and if the production number is good - we could see CPO breach M$2000 per tonne which to me could see further weakness in the Golden Agri share price.......I think S$0.25 seems to be a good level to start accumulating for a year-end recovery in palm oil prices.

Bucking the price weakness is Wilmar (see price chart below)

The strong price performance is linked to its planned listing in HK of some of its plantations on a PER of 20.  I think this doesnt sound like a good reason because the Malaysian plantation stocks which are now seeing  rise in sell recommendations are trading on PERs in the high teens...let alone 20 times PER.

Technical indicators for Wilmar reflect more downside risks than Golden Agri

Bottom line - I think Golden Agri is definitely worth keeping an eye on......watch for the production numbers tomorrow.    At S$0.25 which looks like a good level to accumulate, you would be looking at a prospective PER of about 8-10 times which is more reasonable than the high teens of the Malaysian plantation stocks and which also gives some buffer for any earnings downgrades by analysts.