Thursday August 19, 2010
Europe to import more palm oil
SINGAPORE: European consumers will be forced to boost shipments of palm oil, despite a vigorous campaign by green groups against it, after a drought that shrivelled oilseed crops across the Black Sea region.
Palm oil futures on the Bursa Malaysia Derivatives Exchange climbed to a 15-month top last week and the market could be set for further gains as European consumers scurry for supplies to satisfy demand from the food and fuel sectors.
A storm could be brewing in global vegetable oil markets, analysts say, although not on the scale seen in US wheat futures, which surged to two-year highs this month.
“Europe’s rapeseed crop was lower than expected and Ukraine is going to have a very limited supply available for exports,” said Doug Whitehead, a commodities analyst at Rabobank in London.
“It really means that rapeseed oil supplies will be very much constrained, so it is likely we will see palm oil moving as a substitute.”
Hamburg-based analysts OilWorld forecast the European Union’s palm oil demand to rise 4.4% to 5.7 million tonnes in the oil marketing year to September 2010, making the region the No.3 buyer after India and China.
That coincided with expectations for the European Union’s rapeseed crop to fall 7.8% to 19.9 million tonnes in 2010 from a year ago while Ukraine’s sunflower crop might drop 2.7% to 7.1 million tonnes, OilWorld data showed.
Excessive rains are likely to cut canola production in Canada, reducing exports by nearly 20% to 6 million tonnes.
Data from cargo surveyors shows that demand for Malaysian palm oil from the region has outpaced India and China so far in August, and traders expect more.
“We expect to see some new orders coming this week onwards to September or October,” said a trader with a Singapore-listed planter who deals with European buyers. Inquiries are there and sentiment is positive. European customers will buy on small dips in the current palm oil rally. They don’t want to be caught offguard.”
In the Rotterdam cash market, palm oil was up 11% in August, while its discount to rapeseed oil has widened to more than US$175 a tonne, making palm oil a cheaper substitute. — Reuters