MUMBAI: Benchmark crude palm oil (CPO) futures in Malaysia may fall 13 per cent to RM1,900 a tonne but prices will rise next year as the El Nino weather phenomenon hits output, a top industry analyst told a conference yesterday.
Prices were likely to rise to RM2,400 a tonne next year, said Dorab Mistry, head of vegetable oil purchasing at India’s Godrej International and a respected analyst.
On Friday, benchmark December contract on Bursa Malaysia Derivatives settled at RM2,186, up RM71, halting two straight days of declines, and moving above the 200-day moving average of RM2,141.
“I believe CPO futures for the third month on the BMD will need to go down to RM1,900 to buy energy demand and keep stocks under control,” said Mistry.
“As we enter 2010, I believe CPO futures production will decline due to seasonal factors and also due to the effects of El Nino,” Mistry told the conference.
Conditions typical of a drought-bringing El Nino weather event were likely to continue until at least the end of this year, Australia’s Bureau of Meteorology said this month.
“We shall have to watch January-May 2010 palm oil production very carefully to estimate the effects of El Nino,” Mistry said.
“For the present, I do believe there will be some effect on palm oil production in the first five months of 2010 and that will be supportive of prices. The problem for the market is going to be the period between now and January 2010.
Mistry said supplies of rival soyaoil would be tight in the fourth quarter of 2009 and the first quarter of the next year.
“Coupled with tightness in soyaoil in Q1 2010, we could see a nice bounce on palm prices taking BMD (Bursa Malaysia Derivatives) CPO futures to RM2,400 once again,” Mistry said.
Crude palm oil prices in Malaysia, the world’s biggest palm oil producer behind Indonesia, hit a record RM4,486 a tonne in March 2008 before collapsing in the global downturn.
Mistry said palm oil inventories in Malaysia would rise to more than 2 million tonnes by the end of November.
“The situation reminds me of last year when Malaysian stocks peaked at 2.265 million tonnes at the end of November,” he said.
Mistry maintained his forecasts for Indonesia’s 2009 palm oil output at 21.5 million tonnes from about 20 million tonnes last year and Malaysian production at 17.5 million tonnes in 2009, compared with 17.75 million tonnes last year.
“If these estimates turn out to be accurate, we shall see a major build up of stocks. As you know, Malaysian stocks are a big price making factor,” he said.
Despite drought in Argentina and India, Mistry said the El Nino weather pattern might not severely hurt palm production.
Mistry on Friday said India may tax crude vegetable oil imports in the new oil marketing year that begins in November 2009, if the domestic winter crop is good.
Mistry said an Indian tax on imports seemed inevitable.
“I think so, yes. If the winter-sown crop is comfortable, the government will have no choice but to impose tax on imports,” Mistry told reporters at the conference. Source : Business Times
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