Palm oil may tumble as much as 7.4 per cent by the end of October as

Malaysian production rebounds and Indonesian growers speed up shipments

because of an export tax, according to Godrej International Ltd.

Futures

may decline by RM150 to RM200 a tonne, Dorab Mistry, a director at

Godrej, told an edible oils conference in Mumbai today. The company is

one of India’s biggest buyers of cooking oil.

Palm oil has

jumped 19 per cent from an eight-month low on July 7 this year on

optimism consumption will increase in Asia because of festivals and

excess rainfall may disrupt harvests in Malaysia and Indonesia, the

world’s top producers.

Malaysian inventories climbed 23 per cent

to 1.72 million tonnes in August from July, the country’s palm oil

Prices

may remain “sideways with a lower bias for the next four to six weeks.”

Mistry has traded vegetable oils for more than three decades.

The

December-delivery contract rose 2.1 per cent last week to RM2,701 a

tonne on the Malaysia Derivatives Exchange, climbing for a fourth

straight week.

Futures may trade between RM3,000 and RM3,200 by

January as India and China, the biggest consumers, begin to rebuild

inventory, said Mistry, who correctly forecast in March that palm oil

would rise in the second half. He said prices may trade between RM3,000

and RM3,200 after June.

“We have seen in history that every El

Nino-inspired bull market has been followed by a very cruel bear

market,” Mistry said, referring to the dryness caused by El Nino and

higher-than-normal rainfall brought on by La Nina.

“El Nino has

been followed almost immediately by a La Nina” this year, impeding a

recovery in global oilseed and oil output, Mistry added.

Production

in Malaysia will drop 2 per cent to 17.2 million tonnes this year and

output in Indonesia may expand by 500,000 tonnes, Mistry said.

Malaysia may produce 17.8 million tonnes,Plantation Industries and

Commodities Minister Bernard Dompok said at the conference September 24.

Indonesia said August 12 that production may fall to 19 million and 20 million metric tonnes, from 21 million in 2009.

Global

vegetable-oil demand will increase by 4.5 million tonnes in the year

beginning October 1, exceeding the 3.8 million tonnes increase in

supply, Mistry said.

India’s vegetable oil imports may increase

to 9.3 million to 9.5 million tonnes in the year beginning November 1

from 9 million tonnes this year, he said. Purchases will include 7.2

million tonnes of palm oil, 1.5 million tonnes of soyabean oil and

400,000 tonnes of sunflower oil, Mistry said.

Soyabean oil

prices will trade “sideways” to “slightly” lower for the next four to

six weeks and the vegetable oil may become more expensive than palm oil,

he said.
– Bloomberg