SINGAPORE (March 22, 2013): Palm oil futures could rise to RM2,400 to RM2,700 per tonne by the end of May, as weaker production speeds a fall in stockpiles, leading analyst Dorab Mistry said on Friday.
The forecast is an upward revision of his earlier prediction for prices to fall below RM2,200 between April and the end of June, as crude palm oil yields have fallen more than expected.
“I am projecting today that Malaysian stocks will dip below 2 million tonnes in June 2013. Indonesian stocks will also be drawn down below 4 million tonnes,” Mistry said in a speech to be delivered at an industry seminar in Beijing.
Palm stocks in Malaysia, the second largest producer of the commodity, stood at 2.44 million tonnes at the end of February. While top producer Indonesia does not publish official stocks data, Mistry pegged its stocks at close to 5 million tonnes in early March.
A weaker ringgit ahead of the Malaysian elections, which have to be called by the end of April, could also offer greater scope for the ringgit-denominated futures to rise as the commodity becomes cheaper for overseas buyers, added Mistry, who is the head of vegetable oil trading with Indian conglomerate Godrej Industries.
But prices will still come under pressure after June, Mistry said, and especially once the low production cycle ends in the August-September period.
With energy prices on a decline, futures may fall to RM2,000, or even lower, after August.
“I do not expect them to break RM1,800 unless Brent crude oil trades below US$80 per barrel,” he said, sticking to a prediction he made in Kuala Lumpur this month.
Mistry also kept his earlier projection of an increase of 3.5 million tonnes in world food demand and an increase of 1 million tonnes in world biodiesel demand.
The analyst said big shipments for the Muslim fasting month of Ramadan would be made in the second half of June and first half of July. Vegetable oil demand typically rises during the Muslim festive month due to higher consumption.
Mistry also said India, the world’s largest importer of palm oil, will increase its duties on edible oil imports this year.
“I remain confident that inflation in India will keep declining and that will enable the Indian government to raise import duties on refined and unrefined vegetable oil,” he said, but added that the hike might not happen until after the Malaysian elections.
Mistry added that China, the world’s No. 2 buyer of the edible oil, may prefer buying crude palm oil rather than the refined grade after introducing tougher import rules on refined edible oils this year.
“It is quite conceivable that in the long run, China will turn into an importer of crude palm oil and will prefer to refine and fractionate palm oil within China,” he said. – Reuters
Source : The Sun Daily