RBS : Palm Oil's Sentimental Strong

Palm oil prices will rise as a shortage in the world’s cheapest edible oil is harder to remedy than the current shortage of soyabeans, an analyst at Royal Bank of Scotland Asia Securities (Singapore) Pte Ltd (RBS) said. “Palm oil is the one to bet on from the commodity perspective and an equity perspective,” Nirgunan Tiruchelvam, plantation analyst at RBS, said in an interview yesterday. “The shortage you see in palm oil is much more difficult to dislodge than in soyabeans. Soyabeans are an annual crop, while oil palms take three years to reach maturity.” Malaysia, the second-largest producer of palm oil, is likely to miss the government’s 2009 production forecast after rains affected pollination in the eastern state of Sabah, which accounts for more than one-quarter of the country’s output, analysts say. Ben Santoso, a plantation analyst at DBS Vickers Securities (Singapore) Pte Ltd, on September 11 cut his full-year Malaysian production estimate to 17.6 million tonnes from an earlier forecast of 18.1 million tonnes. That compares with the record 2008 output of 17.7 million tonnes. Palm oil futures traded in Malaysia rose RM91 to RM2,181 a tonne yesterday. Prices may average US$717 (US$1 = RM3.50) a tonne this year, rising to US$750 next year and US$785 in 2011, Tiruchelvam said September 10, raising his forecasts 2.4 per cent for this year, 2.7 per cent for next year and 4.7 per cent for 2011. Palm oil has averaged US$630 this year. “The fundamentals of the commodity are strong as demand from China and India, the two largest users, is rising about 10 per cent a year,” Tiruchelvam said. Drought has damaged soyabean crop in Argentina and Brazil, the second- and third-largest producers, and delayed planting in India, the second-largest edible oil user. The global oilseed shortage helped boost prices of palm oil, a direct substitute for soyabean oil, by 27 per cent this year. Soyabean oil traded in Chicago has gained 2.5 per cent this year. RBS recommended plantation stocks such as IOI Corp, Golden Agri-Resources Ltd, listed in Singapore, and Jakarta-listed PT Perusahaan Perkebunan London Sumatra Indonesia. – Bloomberg Source : Business Times

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