Malaysian crude palm oil futures may rise about 20 per cent to trade close to 3,000 ringgit in the second half of 2010 as erratic weather slows output growth and demand strengthens, a top industry analyst said on Thursday. Godrej International’s head of vegetable oil trading Dorab Mistry said there has been a strong catch-up rally in vegetable oil prices, particularly palm oil that currently trades at around 2,500 ringgit on the Bursa Malaysia Derivatives (BMD). Palm oil gained 6 per cent in July, after dropping for two straight months before that. “CPO (crude palm oil) on the BMD will trade close to 3,000 ringgit and then perhaps even climb above that target depending on how production shapes and the world economy performs,” Mistry said in a speech to be delivered in Brazil. Top producers Indonesia and Malaysia are facing lacklustre production after El Nino-driven drier weather sapped yields and stunted the development of oil-rich female palm flowers in the first half of 2010. This was followed by the La Nina weather pattern, which could deal another blow to production as it brings more rains and stalls harvest of palm fruit bunches in certain areas. Planters are concerned that heavy rains may cause floods towards the end of the year and complicate the task of transporting palm oil to refineries and ports. “I stand by my forecast of Malaysian CPO production in 2010 at 17.2 million tonnes. Indonesian CPO production has also disappointed and I feel compelled to reduce my forecast of growth to just 500,000 (from 1 million tonnes),” Mistry said. Mistry’s forecast for Malaysian production is lower than government’s revised target of 17.8 million tonnes. Indonesia had earlier aimed to produce 22.5 million tonnes of palm oil this year, from 20.6 million tonnes in 2009. “CPO production during the Ramadan period will be flat to lower and recovery will have to wait until October,” he said, referring to the Muslim holy month of fasting in mid-August that will see Indonesian plantation workers taking leave. RIVAL SOYOIL

Palm oil’s key rival, South American soyoil, could rise 21 per cent to $1,050 free on board (FOB) Argentina as demand from emerging markets as well as top vegetable oil consumers India and China will outpace production, Mistry said. Source: Business Standard