The benchmark Malaysian crude palm oil (CPO) futures may rise to 2,000 ringgit ($541.4) and test even 2,100 ringgit in the next few weeks as stocks fall in top producers Malaysia and Indonesia, the two major producers accounting for 90 per cent of world production.
But, the leading edible oil may come under pressure in the second half of the current calendar year from both soya oil and a combination of bumper estimated production and weaker demand, warned Dorab Mistry, director, Godrej International while presenting his paper at a seminar in Kuala Lumpur on Thursday.
The range for CPO prices from now until October is 2,100 to 1,500 ringgit. In US dollar terms, RBD Olein is likely to go down and challenge $500 FOB or lower, Mistry forecast.
The commodity for May delivery on Malaysia’s Derivatives Exchange fell 1.3 per cent at 1,955 ringgit after hitting the high of 2,026 ringgit ($549), the highest since January 7.
The paper estimates India’s vegetable oil production to fall 7.21 per cent at 6.63 million tonnes during 2008-09 oil year (November - October) as against 7.15 million tonnes in the previous year. The decline was largely attributed to crop diversion to more remunerative commodities including wheat and pulses.
Indian consumption of vegetable oil will expand half a million tonnes. However, this is due to the low prices brought about by the abolition of import duty on CPO and crude sunflower and rape oil, and very low import duties on other oils. This is an unusual situation. Elsewhere in the world, particularly in Eastern Europe, in Ukraine, in Africa and even in Western Europe more frugal behaviour can be seen. Waste will be eliminated and consumers will be more careful in their spending habits. This must lead to stagnant or even lower per capita consumption, the paper said.
While the consumption, is estimated to rise by 3.89 per cent to 13.50 million tonnes this year as against 12.995 million tonnes in the previous year. Meanwhile, despite the economic downturn, India’s per capita consumption of edible oil is estimated to rise to 11.64 kgs this oil year as compared to 11.40 kgs in the previous year.
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The world consumption of vegetable oil as food, Mistry estimated, to expand only by 2 million tonnes at best.
But, a lot will depend on how bad and how ugly things get over the next few months. So far, in 2009, the economic news has been grim and things are likely to worsen.
Supporting his views, Thomas Mielke, executive director of ISTA Mielke GMBH in Germany, publisher of Oil World, the leading periodical on vegetable oil since 1985, projected crude palm oil prices to rise 6.7 per cent from the present prices to an average of $640 per tonne by June as global output of vegetable oils slows. Prices of RBD palmolein will be around $670 a tonne cost, insurance and freight (cif) Rotterdam for the same period. But, global economic downturn may limit price rise in palm oil, he added.
Last year, palm oil futures swung wildly, trading between 3,000 and 3,598 ringgit in the first half as big importers scrambled to buy amid dwindling global vegetable oil prices. In the second half, however, the commodity prices traded much lower, between 1,837 and 3,624 ringgit, as the credit crisis infiltrated palm oil markets, leading to defaults by top consumers China, India and Pakistan and record stock levels in palm producing countries.
In contrast, James Fry, managing director of the renowned LMC International Ltd forecast palm oil to trade between 1,400 ringgit ($380) and 1,500 ringgit a tonne due to the lower energy price on global economic recession.