Edible oil prices are expected to strengthen in the new oil year starting November on healthier demand from the food sector and increased biodiesel use, industry analyst Dorab Mistry said on Friday.
"My price range is around 1,400 to 1,600 ringgit will be confirmed, even though there have been some differences in supply and demand in the last couple of months.
They are not significant enough to change the range," Mistry told Reuters, referring to Malaysian palm oil prices, on the sidelines of a conference.
Over the next few weeks, palm oil prices will remain at the current level of between 1,420 ringgit and 1,430 ringgit a tonne because of the harvest season in most of the Northern Hemisphere.
Mistry, director of London-based Godrej International Ltd, expects prices to rise to the upper end of the range after February, when production usually drops to its lowest level and stocks decline.
Malaysia and Indonesia are the world's largest producers and exporters of palm oil, while Brazil and Argentina are among the top soya oil producers.
More biodiesel usage will result in demand for edible oils rising at least 6 million tonnes, compared with supply growth of 5.25 million tonnes.
"There is going to be a little mismatch, that is why I predict prices will steadily rise over the next 12 months," he added. "I think in the next 12 months we'll find a lot of soyabean oil being used for biodiesel in the US, and the amount of bodiless being produced in the European Union will keep on expanding," said Mistry.
Asked if biodiesel use is feasible in the future, Mystery said: "There are some doubts about what incentives the EU will allow and what incentives will be given."
"The important thing is if the price of crude oil remains about $45 to $50 a barrel, then it's all possible," he said.
Biodiesel output by EU members climbed to an estimated 1.85 million tonnes last year, from 1.45 million in 2003 and 1.05 million tonnes in 2002.
Crude palm oil will be between $370 and $420 a tonne free on board, RBD palm olein will be in the $400-$450 range and crude degummed soya oil $450-$500 free-on-board.
Chinese demand should remain buoyant because of buoyant economic growth, he said. "Next year there's no quota in China. I think they're going to take more palm next year."
Mistry estimated that demand from India next year would be little changed at between 5.4 million and 5.5 million tonnes, compared with 5.7 million tonnes this season.
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