Plantation cheer.

IS Kuala Lumpur Kepong a large-cap proxy to the crude palm oil prices boom? IT'S GOOD TIMES AGAIN FOR Malaysian planters, in particular, those in oil palm cultivation, thanks to the strong uptrend in crude palm oil (CPO) prices, which are rallying up on both its own fundamentals as well as taking the cue from the global rally in commodity prices. CPO spot prices recently surged to a 26-month high on weaker US soybean output forecast at around RM3,000/MT (metric tonne), and sentiment is running high for players in the sector, given that prices have stayed above RM2,500/MT for most of this year (see chart).

A number of factors have been helping CPO prices and its competitor, soybean oil, to rally to their highs for the year. The key factor is mainly lower supply forecasts going forward for soybean harvest in the US.

According to a report from Affin Research, the United States Department for Agriculture (USDA) has recently revised down its latest soybean production output for 2010 from the 3.483 million bushels forecast in September to 3.408 million bushels on the back of the estimate of lower area to be harvested (-1.5%) and lower yield (-0.7%).

In addition to the lower US soybean forecast, the research house says that the …