Landbanking: CPO price hits historic high!

Yesterday’s headline screams, “CPO price hits historic high“. The crude palm oil (CPO) 3-months futures contract price soared to a historic high of RM3,080 per tonne on 26 December 2007. If you refer to my previous blog post on Country Heights Grower Scheme (CHGS) you will recall that I use an illustration of flood as a common risk to plantation owners. I have highlighted that when you invest with CHGS you are NOT sharing into the risk of the plantation directly but rather protected by a management agreement governed by a trustee. The risk you take is on the CPO prices.

In fact, with the recent flood in Malaysia, CPO prices have actually risen due the flood. So what happens if you are an investor with CHGS and the same scenario (flood) occurs in the future? You will gain a hefty return based on the CPO price (12%pa to be exact if the average CPO price for that year exceeds RM2,100). But I am no commodity speculator and neither do I have the ability to control the weather (what am I, a witch doctor?). When I invest with CHGS, I invest based on the fundamentals of demand and supply for palm oil. Let’s look at some of the factors that have driven and will continue to drive the CPO price.

Continue to read.. CPO price hits historic high!