Published: Monday September 24, 2012 MYT 8:03:00 AM
Updated: Monday September 24, 2012 MYT 8:10:07 AM
Palm oil prices expected to fall further this year says industry meeting
MUMBAI: Palm oil prices will fall further this year as slowing economic growth reins in demand for biofuel production, leading to higher stocks at top producers Indonesia and Malaysia, an industry meeting concluded on Sunday.
Any support from India, the world's largest importer of cooking oils, will be curbed in the last quarter as its own farmers start marketing product from the summer harvest.
"Stockpile is building in Indonesia and Malaysia, but there are few buyers right now. Offtake from the biofuel industry is very thin despite offering a big discount over soyoil," said Dinesh Shahra, managing director of Ruchi Soya, India's top soymeal exporter.
Palm oil stocks in Malaysia could rise to 3 million tonnes at the start of next year from early September levels around 2.1 million tonnes, according to Dorab Mistry, head of edible oil trading with Indian conglomerate Godrej Industries and a leading expert on the industry.
Indonesia and Malaysia's combined palm oil stocks could total 4.5 million tonnes by the end of 2012, Shahra added.
With stocks high and production climbing, the pressure will stay on prices, delegates said, with Malaysian crude palm oil (CPO) potentially falling as low as 2,500 ringgit ($820) per tonne in the last quarter from around 2,760 ringgit now.
Mistry said there was a 50 percent chance CPO futures prices could even drop to 2,300 ringgit in the last quarter as Indonesia makes tax changes to grab market share from Malaysia, which has been pushing tax-free shipments to India.
Falls in crude oil prices could exacerbate the situation as that makes biofuels less attractive as an alternative.
"I am bearish on crude oil prices. They should come down. Demand is slowing due to a slowdown in the global economy," James Fry, chairman of commodities consultancy LMC International, said.
CPO prices could even fall to 2,285 ringgits in the fourth quarter, he said, if Brent crude drops as low as $80 per barrel from current levels around $111.
SOYOIL PREMIUMS TO CURB DEMAND?
Meanwhile, as the major producers continue their drive to reduce stocks, the hefty discount of palm oil to soyoil is likely to continue, delegates said.
"The palm oil discount is big and will probably stay big to avoid burdensome stock building," said Stefan Gierga, managing director at Bunge Handels GmbH trading company.
That differential could cut India's soyoil imports in the marketing year from Nov. 1, 2012 from about 1 million tonnes in the current year, according to Atur Chaturvedi, chief executive of Adani Wilmar, a leading India-based edible oil importer.
But even so, delegates felt India's total cooking oil imports may hit a record around 10 million tonnes in 2012/13 as its bulging population -- adding about 19 million people a year -- along with an increasingly wealthy middle class raise demand.
Soyoil prices themselves could start to wilt as soybean output in South America rebounds after a severe drought last year and the crushing season gets underway in the United States -- with China snapping up the output to make its own soyoil.
"China is aggressively buying new soybean crop of the United States. It is unlikely to raise edible oil imports significantly in the next three months as it will get oil from crushing of soybean," said a dealer with a global commodity trading firm.
Shahra cautioned that things could change if South America's crop was hit by adverse weather.
"I am expecting prices to correct based on stocks. But you don't know what is in the mind of the weather god. If the weather becomes unfavourable for the soybean crop in South America, like last year, then everything will change. Then prices will rise to record high level," he said.
And it is also possible that the deep discount could favour palm oil and push demand higher, said Thomas Mielke, editor of Hamburg-based Oil World.
"Palm oil is offered at discounts of more than $250 (per tonne) under soybean oil. I think this is not sustainable. We are going to see world import demand to shift to the more effectively priced palm oil," he said in his presentation. ($1 = 3.0505 Malaysian ringgits) - Reuters
Palm oil discount to soyoil "unsustainable," to boost demand-Mielke
MUMBAI: Palm oil prices are "sizeably undervalued" in comparison with soyoil and the discount is unlikely to be sustained as lower prices will prompt importers to buy more palm oil, a top world oils analyst said on Sunday.
"Palm oil is offered at discounts of more than $250 (per tonne) under soybean oil. I think this is not sustainable. We are going to see world import demand to shift to the more effectively priced palm oil," said Thomas Mielke, editor of Hamburg-based newsletter Oil World.
The increased demand will help the world's top two palm oil producers -- Indonesia and Malaysia -- raise exports and trim inventory that has been depressing palm oil prices, Mielke said in his video presentation to the Globoil India conference here.
On Friday, benchmark palm oil futures on the Bursa Malaysia Derivatives Exchange lost 2 percent to close at 2,763 ringgit ($905) per tonne, after hitting an 11-month low of 2,755 ringgit earlier in the day.
World production of palm oil is likely to rise to a record high of 54.4 million tonnes in 2013 from 51.6 million tonnes estimated for 2012, Mielke added.
Output could rise to 78 million tonnes in 2020 as higher profitability is bringing in additional plantation, he said.
Global output of sunflower oil in the 2012/13 year starting from Oct. 1 is likely to fall by 1.2 million tonnes, and that should give it a price premium over rival soyoil in the second half of the year, Mielke said.
SOYBEAN TO RESUME RALLY
CBOT soybean futures hit an all-time high of $17.94-3/4 per bushel this month, but have since fallen nearly 7 percent as farmers in the United States hastened harvesting of their new season crop.
However, that crop is likely to be used up quickly due to higher prices and that will again create tight supplies, allowing prices to resume their rally, Mielke said, without giving any time frame.
"Soybean prices will resume their rally, exceeding $18 a bushel, probably rising to $19 or $20 or above if any problems occur in South America," he said.
Sowing has been progressing in South America, where output was hit by a severe drought last year.
CBOT November soybeans finished 0.2 percent higher at $16.21-3/4 a bushel on Friday. - Reuters
India's 2012/13 soyoil imports to fall - Adani Wilmar
MUMBAI: India's imports of soyoil are likely to come down in the marketing year starting Nov. 1, 2012, as the oil has become more expensive in relation to palm oil, a leading India-based edible oil importer told Reuters on Saturday.
In the year ending Oct. 31, 2012, the world's biggest edible oil importer is likely to buy about 1 million tonnes of soyoil from overseas, Atur Chaturvedi, chief executive of Adani Wilmar, said on the sidelines of the Globoil Conference.
Currently, soyoil is asking about $300 per tonne premium over palm oil -- from around $146 per tonne in May -- deterring buyers from putting in new orders for the contract year starting Nov. 1, 2012.
Crude palm oil imports to India in August averaged $980 per tonne on a delivered basis, according to the Solvent Extractors' Association of India. Soyoil imports averaged $1,276 per tonne.
India imports mostly palm oil, sourced from Indonesia and Malaysia, and small quantities of soyoil from Argentina and Brazil. - Reuters
Malaysia palm oil prices may fall at least 7 pct in Q4-analyst
NEW DELHI: Malaysian crude palm oil (CPO) prices may fall nearly 7 percent to 2,575 ringgit per tonne in the last quarter of 2012 from current levels if Brent crude oil prices come down to $95 per barrel, a top analyst said on Saturday.
"I am bearish on crude oil prices. They should come down. Demand is slowing due to a slowdown in the global economy," James Fry, chairman of commodities consultancy LMC International, said at the Globoil India conference here.
"Eventually new supplies (deep sea, tar sands and shale oil) and weak demand growth, led by substitution by natural gas, will pull the market back to earth as oil stocks climb," he added.
Vegetable oil prices benefit from higher crude levels as their use as biofuels, which are seen as greener alternatives to petrol and diesel, becomes more economically attractive.
On Friday, benchmark palm oil futures on the Bursa Malaysia Derivatives Exchange lost 2 percent to close at 2,763 ringgit ($905) per tonne, after hitting an 11-month low of 2,755 ringgit earlier in the day. Brent crude closed at $111.42 per barrel.
He expects the CPO price in the fourth quarter (Oct-Dec) to be 2,285 ringgits if the crude price is $80 per barrel, more than 17 percent down from the current level, although he sees palm oil recovering to 2,450 ringgits in the first quarter of 2013.
"Crude oil is now the key to vegetable oil prices," Fry said in his presentation slides.
The premium of CPO over petroleum prices has fallen sharply since July due to rising inventories, Fry said.
"Mills must put oil into their tanks every day, regardless of the final demand. This makes them into permanent 'distress sellers' and helps explain why CPO always trades at a discount" (to other edible oils).
The London-based analyst forecast Indonesia's palm oil output in 2012 could rise by 8.1 percent to 27.25 million tonnes, while Malaysia may see a 3 percent drop in it production to 18.34 million tonnes. - Reuters