Malaysian crude palm oil futures are rise about 18 percent to 2,900 ringgit ($844.5) per tonne by December on strong demand and lower output yields, top industry analyst Thomas Mielke said on Wednesday. The price of the reddish-brown vegetable oil slid about 17 percent this year and halved from an all-time high of 4,486 ringgit hit in March, due to a knock-out combination of high stocks and news of defaults from key buyers India and China.
"In December the price should be around 2,700 to 2,900 ringgit for the third month contract. We expect increases in prices from here for several reasons," Thomas Mielke told reporters on the sidelines of a regional grains conference in Cambodia.
"Global demand for palm oil is going to pick up due to the very wide price discounts of palm oil relative to soyoil and other vegetable oils. Palm oils discounts are unusually high at the moment whatever locations you take," he said.
Mielke, head of German oilseeds research group Oil World, said the differential between the two products was as high as $500 in the Rotterdam market at the end of August, with crude palm oil being quoted at $835 per tonne and crude soyoil at $1,338 per tonne.
Malaysian crude palm oil futures edged down 0.5 percent to 2,451 ringgit per tonne on Wednesday as crude oil fell closer to the crucial $100 marker, weighing heavily on vegetable oil markets from China to the United States, traders said.
YIELDS SLOWING, EXPORTS PICKING UP? Palm oil supplies have been on the rise in recent months due to the high output cycle in top Asian producers Malaysia and Indonesia. A Reuters poll on Tuesday showed Malaysia's August palm oil stocks are expected to edge up 1.2 percent from a month ago as production could hit its highest level so far this year and outstrip export growth.
But Mielke said the upswing in production was likely to ease off by the end of the year. "In our judgement, the biological yield cycle of the trees is likely to slow down following approximately 15 months of high production," he said. Last week, another analyst Dorab Mistry said Malaysian crude palm oil output forecasts of 17.4 million tonnes could be comfortably exceeded while Indonesia's output will rise beyond 19 million tonnes.
The Indonesian Palm Oil Producers Association is forecasting 18.6 million tonnes this year. Mielke noted export trend was slowly gathering pace for the vegetable oil, which is used in products ranging from sweets and soaps to biofuel.
"Palm oil has become interesting again as feedstock for energy. Palm oil exports from Malaysia and Indonesia since July are increasing," he said. Shipments of Malaysian palm products rose by up to 8 percent in August to nearly 1.5 million tonnes, data from cargo surveyors show. In July exports had jumped as much as 27 percent to about 1.1 million tonnes, snapping two straight months of declines.
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