MALAYSIAN palm oil may still hit RM4,000 a tonne on tight stocks in
the immediate term and as competing soyaoil gets increasingly
channeled to the biofuel sector, said Prudential Bache Commodities
analyst Anne Frick.
A sell-off last week has left palm oil
about 12.5 per cent below the key RM4,000 level, as traders grew
concerned over high crude oil prices and the spreading Middle East
unrest slowing economic growth.
But higher crude oil prices
could increase biodiesel demand for soyaoil in the Americas, leaving
less for vegetable oil export markets and increasing demand for palm
oil as substitute, Frick said.
“There is a short window of
opportunity when palm oil prices could respond to tightening stocks,”
Frick said in an emailed interview ahead of next week’s Bursa Malaysia
Palm Oil Conference.
“Beyond that, highs might be made under the leadership of soyabean
oil rather than palm oil, which has been leader to date in this bull
market.”
Palm oil prices have been rallying since the last
quarter of 2010 as erratic weather disrupt production, tightening
stocks at a time of resilient demand.
Frick said Malaysian
palm oil stocks may have not seen their low point yet given the average
lag of 2.7 months between the lowest month of output and the lowest
month in stocks over the past 28 years.
Malaysia’s January
production hit its lowest in a year. The market appears to be divided
on whether there will be a recovery in February despite heavy rains and
floods submerging estates in key growing areas.
Frick said
palm oil stocks were likely to recover after the summer of 2011,
echoing a scenario raised by other industry analysts that improved
supply may help palm olein normalise its discount to soyaoil from the
current narrow discounts.
Cash refined, bleached and
deodorised palm olein from Malaysia sells at US$1,217.50 (US$1 =
RM3.04) a tonne for March, a US$37.50 discount to Argentine soyaoil,
Reuters calculations show.
Palm olein normally trades at around a deeper US$100 discount to soyaoil.
Both oils compete for use mostly in cooking oil, which is heavily used
in the world’s top vegetable oil buyers, India and China.
“I expect palm olein to trade slightly under soyabean oil but not to a
normal discount until the summer when palm oil stocks begin to recover
and/or crop scare rallies in soyabean boost soyabean oil prices,” Frick
said.
She said soyabean oil prices could also get a fillip from
biodiesel mandates – requiring refiners to blend a certain percentage
of biodiesel into their diesel mix – in Brazil and Argentina, the
world’s No.2 and No.3 soyabean producers after the US.
“Biodiesel mandates are likely to be a key factor in Brazil where it could reduce soyabean oil exports,” she said.
“Mandates in Argentina don’t have the same volume effect because its
population is only one fifth of Brazil’s, but if the differential
export tax continues, that could keep biodiesel production strong in
Argentina.” – Reuters
