Obviously the returns per hectare increased in tandem. The recent price appreciation of the commodities is subsequent to the increase demands of BRIC (Brazil, Russia, India and China) and the USD shrinkage from the recent Quantitive easing in the USA. in response to the recent crisis.
The average selling price of crude palm oil (CPO) is a major determinant of profitability of the planter. Many major plantations in the country hedge their positions with forward selling of their produce. Their intentions are clear to sell at the best possible price in all prevailing conditions. Unfortunately some oil palm based prominent listed companies had failed to mimic the average selling price of the Industry as reported and recorded by Malaysian Palm Oil Board. The performance of the listed company (UP) failed miserably during the 3 recent crisis – Teiquila Mexican crisis in 1994-1995; Tomyam banking and financial crisis in 1997-1998 and the Subprime and CDO crisis in 2007-2009.
For United Plantations the loss is illustrated in the graph for Crude Palm Oil and Palm Kernel Oil.
Translated into loss of earnings this can be very significant as illustrated in the graphs below
For Crude Palm Oil
For Palm Kernel Oil
The effect on the gross earnings per share over the years is RM1.88, a not insignificant amount.
Trading is a zero sum game. There is an opportunity of gain as well as a risk of loss. The advantage belongs to the paid professional. Unfortunately this is questionable here.
Past performance is not indicative of future outcome. Ironically the results were repetitive over the years.