Erratic weather that is slowing palm oil output growth and strong demand will lift benchmark Malaysian futures to RM3,300 a tonne in January, top industry analyst Dorab Mistry said.
Mistry, who heads the trading desk for India’s Godrej International, said he was sticking to an earlier forecast that palm oil would reach RM4,000 by mid-2012 on the view the world will not plunge into a recession due to resilient growth in Asia.
Mistry’s remarks were part of a speech that he was giving at the China Oils and Oilseed Conference in the southern city of Guangzhou yesterday. Reuters obtained an advance copy of the speech.
Palm oil futures have see-sawed in recent weeks due to concerns the eurozone debt crisis would stall growth although last week, the market went above RM3,100 after data showed Malaysian stocks slipped in October.
“In the last few weeks, the pace of increase has been decelerating, particularly in the case of older tall trees,” Mistry said in the speech.
“Add to that, the weather in Malaysia and in Indonesia has turned far too wet and this leads to flooding, slower harvesting and other related problems,” he said, referring to La Nina-driven rains striking at the same time as the monsoon season at the end of the year.
Mistry said he was revising Malaysia’s 2011 production forecast to 18.8 million tonnes from 19 million tonnes previously. For the first 10 months of the year, production in the world’s No. 2 producer had reached 15.8 million tonnes.
For Indonesia, the world’s largest palm oil producer, Mistry also cut estimates to 25.2 million tonnes from 25.5 million tonnes. There is no data on monthly Indonesian production although traders say output has easily risen above 22 million tonnes.
“The discount of palm oil to soya oil made sure that palm oil exports remained buoyant and stocks levels were always under control,” London-based Mistry said.
“From November this year, we shall see a drawdown in palm oil stocks. It will become a function of price and of spreads to keep stocks in the second half of 2012 at a workable level,” he added.
Malaysian palm oil futures climbed to a their highest in more than three months on Friday, buoyed by a strong demand and a surprise drawdown in stocks.
Benchmark January palm oil futures on Bursa Malaysia Derivative settled up 0.51 per cent at RM3,135, after climbing to as high as RM3,160, a level unseen since July 21.
“We are entering the lean production months and demand is continuing to remain strong month after month,” a Kuala Lumpur-based trader said.
Reuters analyst Wang Tao said Malaysian palm oil may rise more to RM3,240 a tonne, and support is at RM3,080.
Soyaoil will remain a price leader as more tonnage gets channelled into the biodiesel sector by way of government mandates in the Americas, meagre crush margins prevent farmers from selling and a possible dry La Nina impact on South American crop
Mistry said soyaoil FOB Argentina will rise to US$1,450 (RM4,568) a tonne to maintain a premium of US$100 to US$120 (RM315 to RM378) over crude palm oil, without giving a time estimate. Currently, Argentine soyaoil is offered at US$1,135 to US$1,148 a tonne (RM3,575 to RM3,616), creating a premium of about US$160 a tonne (RM504), traders say.
Mistry added that Chicago soyaoil futures would trade between 65 and 70 cents (RM2.05 and RM2.20) by June 2012.
Source: Business Times