Thursday March 7, 2013

Mistry: CPO price may turn volatile during upcoming general election period


<B>Mistry:</B> ‘I am personally against such export duties because it can kill the market.’ Mistry: ‘I am personally against such export duties because it can kill the market.’

KUALA LUMPUR: Renowned commodity trader Dorab Mistry expects the price of the local crude palm oil (CPO) to turn volatile during the upcoming general election period, with the CPO futures on Bursa Malaysia Derivatives trading at RM2,300 to RM2,500 per tonne until end-April before turning more bearish to possibly hit RM2,200 per tonne in the second quarter.

However, the good news is that the CPO futures price is not likely break the RM1,800-per tonne level unless the Brent Crude Oil price falls below US$80 (RM248.40) per barrel per day, according to Mistry, who is a director with Godrej International Ltd.

“Hence, even the most inefficient oil palm plantation companies producing CPO within the RM1,500-per CPO tonne all in costs could still stay profitable during this bearish market conditions,” he told participants on the final day of the Palm and Lauric Oils Conference and Exhibition: Price Outlook 2013 organised by Bursa Malaysia Derivatives Bhd yesterday.

Mistry pointed out that integrated plantation companies, particularly those involved in branded cooking oils, margarine, speciality fat, oleochemicals and animal feeds, were expected to prosper more on better demand compared with the pure upstream plantation players producing CPO.

“Malaysia's high palm oil stocks will also be drawn down further within the next three months,” he said, adding that July to August would be critical months for the next price direction for CPO, depending on the outcome of the US Department of Agriculture crop estimates.

Mistry, who admitted that his prediction last year that the CPO price might rally to RM4,000 per tonne by this June was incorrect, however, claimed that he was spot on with his forecast in Bali last month that CPO could trade in the RM2,300 to RM2,600 per tonne range up to February.

He also stressed on the significance of the booming United States mineral oil production that could be a game-changer, whereby players could no longer become bullish on energy prices co-relating with the CPO price movement.

“This will have a direct impact on the palm-based biodiesel initiatives led by the respective governments. Last year alone, the world demand for biodiesel had shrunk by two million tonnes.

“At the same time, there is a development in which many Western countries are now starting to cut back on their biofuel subsidies and targets. Some European nations are already backtracking on their biodiesel mandates, while in the United States, there is an issue over the withdrawal of the Blenders Credit at US$1 per gallon,” explained Mistry.

Other threats to the CPO price outlook this year included geo-political tensions, the collapse of the US dollar and major weather problems in the revival of the El Nino phenomenon.

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