The edible oil complex is unlikely to witness much volatility in 2010 as bumper soybean crop in one region will offset low palm oil production in the other, market participants said.
Low palm tree production cycle in Malaysia and Indonesia may support crude palm oil in the first half of the year, whereas bumper crop in South America will weigh on soybean and soy product prices, they said.
“Overall trend for soyoil and palm oil is seen positive. Although, we have huge global soybean crop, oil recovery from it is only 18 per cent. Also, world demand for edible oils is going up. So, a major downside in prices is unlikely,” said Sandeep Bajoria, chief executive officer, Sunvin Group.
Domestic oilseeds and edible oil prices may move in tandem with international markets, but prospects of a good rabi crop, high imports and low oilmeal exports may weigh.
“Even if prices in overseas markets rise, local prices may not see a similar increase as demand for soybean and soymeal is slack. Supply is also expected to remain ample due to high imports,” said Veeresh Hiremath, analyst, Karvy Comtrade.
Overseas markets
Crude palm oil and soyoil prices are likely to rise in the first quarter of 2010 due to low supply and stable-to-firm demand, industry officials said.
More From This Section
However, prices may ease after Argentina and Brazil’s soybean crop hits the market, they said.
Last week, Dorab Mistry, director, Godrej International, said crude palm oil futures on Bursa Malaysia could surge to 2,800-3,000 ringgits a tonne by March-end and soyoil prices may rise by around $100 a tonne due to tight supply.
Today, benchmark March crude palm oil contract on Bursa Malaysia ended at 2,494 ringgits a tonne, down 21 ringgits from Tuesday’s close.
“I expect prices to go up in the near-term, and for the whole year also I am bullish. We may see some impact of El Nino on palm oil output next year apart from its (palm trees’) low production cycle,” said Gnanasekar Thiagarajan, director, Comtrendz Risk Management Services.
However, the upside may be capped by the bumper soybean crop and low demand growth in major importing countries like India, industry officials said.
“We are staring at a huge South American crop with over 50 million tonnes (mt) in Argentina and over 64 mt in Brazil. US has already harvested a bumper crop of about 90 mt, so I do not see markets running up too much,” said Atul Chaturvedi, chief executive officer, Adani Wilmar Ltd.
US is the largest producer of soybean in the world, followed by Brazil and Argentina.
Chaturvedi also said the spread between soyoil and palm oil has narrowed, so palm oil prices may ease in the near-term to maintain the balance.