FT’s Kevin Brown echoes some of the points we made regarding crude palm oil and specifically the fundamentals underlying the case for a secular bull market ahead.  That said, he writes, while margins are fat at the moment for producers like Siam Darby and Golden Agri-Resources–the world’s first and second biggest listed producers respectively–given spot prices, production costs may be set to soar in the coming years as an increasing lack of plantable land in both Malaysia and Indonesia is leading to another bout of African land and resource grab–”not suprising since the Asian industry got its start by importing plants from Africa back in the 1960s”–in which development costs will increase.  Nevertheless expect Siam’s talks with Cameroon (a country that has explicitly made palm oil production and research an investment priority) to ultimately succeed, while Golden Agri, fresh off its Liberian-deal last fall, will likely continue expansion as [African] governments are “eager for export

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Robust consumption (global demand has doubled over the past decade) for crude palm oil and its underlying derivative products such as cooking oil, cosmetics, toiletries, and industrial cleaning agents (i.e. all fairly demand sticky goods) led by China and India (5%/annum growth over the past four years, propelled of late by government restocking in the face of inflation-induced reserve releases, in the former and 16% y/y in the past five years for the latter, augmented partially by a lagging domestic peanut oil sector) coupled with La Nina-related, mediocre crop yields in Argentina (the third largest exporter of soybeans and the top exporter of soybean oil) and El-Nino related low yields in Malaysia (which, coupled with Indonesia, supplies roughly 90% of global palm oil production) may help sustain futures prices in the short-term.  Analysts point to Singapore-listed Golden Agri-Resources, for one, as a firm that will likely continue to benefit.  Barclays projected “global stocks could fall to around

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Much like India (and to a lesser degree China and Brazil) Indonesia has been hurt by the fact it is growing "too fast".  Last week the country's central bank raised rates for the first time, and overnight we got word that the economy is expanding at a near 7% clip, or the fastest in 6 years.   Unlike the Indian indexes there has been a much better bounce in the Indonesian market from lows of 2 weeks ago, but still quite a ways off highs in December 2010 and very early January 2011.  I continue to be a big fan of this resource rich country, which I think will be hitting the mainstream investment world in the coming few years. Now that we have had some time to evaluate how iShares MSCI Indonesia (EIDO) versus the older Market Vectors Indonesia (IDX) it appears they are tracking quite similarly, indeed both ...

Indonesian government bonds (INDOGB) delivered a total return of 28% in 2010 from rates (23%) and FX (5%).  The front-end of the curve, however, looks especially vulnerable as Bank Indonesia’s (BI) recent 25bp rate hike looks to [finally] mark the end of a hitherto dovish monetary policy in the face of three consecutive months now of rising inflation expectations.  Barclays, for one, expects headline inflation to rise to 7.5% in Q1 (the latest 7% y/y inflation in December breached the 4-6% target) ”given high global food commodity prices, persistent wet weather and recent IDR weakness.”  And while BI’s latest statement mentioned the additional need to “strengthen the rupiah exchange rate,” which in theory would help shore price pressure short of policy rate meddling, analysts note that “strong domestic demand means that the current account surplus will shrink in 2011 to 0.5% of GDP from 1.1% last year, providing lesser fundamental support for the rupiah.”  Further complicating that dynamic

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A protracted, La Nina-related wet season cut Indonesia’s thermal coal exports (the country is the world’s largest exporter) by 15 percent in 2010 (though the overall industry’s capex was up 18% yoy, suggesting the potential for increased volume capacity), hurt output in other key producing regions such as Queensland, South Africa and Colombia and will give miners “the upper hand over the utilities in the next round of annual contracts negotiations,” as many analysts predict rising thermal coal prices against the backdrop of tightening supplies coupled with feverish and price-sticky demand from developing countries.  In India and China, for instance, roughly 67% of primary energy used comes from coal (versus a developed country average of 20%).  Indonesia is a bit more oil-intensive (at a tremendous subsidized cost) though the idea going ahead, per Bukit Asam, is to “burn more [coal] to make up for falling crude oil production from aging fields.”  Taken together this points to

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A post on Egypt's population is coming up, I assure you all. The importance of the subject merits doing it right. For now Suffice it to say that Egypt's key to the future of the regions of Nasser's Three Circles, the Arab world, Africa, and wider Islamic civilization.In the meantime, let's take a look at South Africa, the other middle-income African country of global import. South Africa's

Long time readers will have a giggle out of the headline since that thought was on FMMF's pages long before it hit BusinessWeek!  Back in summer 2009 I wrote: So perhaps we are looking at IBRIC? Or BRICI? That said, I never was able to catch the tail on the donkey named Market Vectors Indonesia ETF (IDX) as the only true pullback it had in 1.5 years (last May), I missed my limit order by a few dimes.  Clearly it would have been far better to just buy the very extended chart in May 2009 around $40 and take the ride, but we are always so much smarter with the ability of 20/20 hindsight.  Probably one of my biggest regret's the past 2 years was not once catching this train. ...

Jakarta-based PT Panin Sekuritas, whose Panin Dana Maksima fund has returned an annualized 45 percent over the past five years, noted to Bloomberg last week that inflation concerns were “overstated” and that consumption growth was “likely to hold up” in 2011 even in the face of potential rate hikes.  Jakarta’s Composite index has risen roughly 42 percent this year, making it the best performer among Asia’s 10 biggest indices.  Higher inflation, however, would dampen domestic spending which accounts for roughly two-thirds of output, as would a rate increase–the central bank has kept benchmark rates at a record low at 6.5 percent for 16 months, effectively underpinning demand.   Headline inflation rose to 6.3% y/y in November (from 5.67 in October and exceeding the Bank’s stated target of 4-6% in 2010 and 2011) on the back of higher global food commodity prices which many analysts expect to remain elevated,

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The plight and root cause of surging physical rubber prices in Thailand (the world’s largest producer with 31% of global natural rubber output), Malaysia and Indonesia, as well as rubber futures across various exchanges, somewhat echo that of the cocoa industry in the Ivory Coast: persistent underinvestment in the past and thus a continual dependence on aging infrastructure (i.e., rubber-yielding trees planted in the 1980s and thus just beginning to enter the stage of declining yields, per Macquarie, an investment bank) and a stable-to-shrinking supply of agricultural land–is finally translating into increased volatility in quality and yield.  Coupled with ever-changing weather patterns and voracious demand from emerging markets for tires, condoms and gloves–led by China, whose tire consumption according to the FT grew 57% y-o-y for 1H2010 per Pirelli–and prices are likely to stay trending upward.  The cash price in Thailand gained 1.6 percent to 130 baht ($4.40) per kilogram this week, just

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While early on the Indonesia case, my refusal to chase the ETF I highlighted a long time ago has cost dearly.  This has been one of the (if not THE) hottest market on the planet the past year and a half.  The dips are quick and violent but never seem to come to an area I have a limit order waiting so instead of Indonesian exposure, I have empty hands.  (I missed on a limit order in May 2010 by about 50 cents)   From when first highlighted in May 09, ETF IDX has rallied 175%!  However, at this point, the country is probably getting expensive as developed world's central banker's money had flooded in - so we'll see how this ends.  Eventually these developing markets suffer some sharp corrections, but the next time around I'll be waiting.  I've renamed BRIC to iBRIC, as Indonesia definitely appears to deserve similar ...