Palm oil likely to hit $683 a tonne: Godrej

Palm oil prices may rise by more than a fifth to 2,400 ringgit ($683) a tonne in the final quarter of the year, said Dorab Mistry, director of Godrej International, one of the country's biggest buyers of vegetable oils.

"We are in the midst of a rousing bull market, whose termination is nowhere in sight," said Mistry, presenting a paper at a conference on price outlook of vegetable oils in 2007-08 in Kuala Lumpur on Wednesday.

The South American soyoil might have bottomed out at $590 and should be expected to steam its way to a target of $650 to $700, as the domestic demand for biodiesel continues to rise, he added.

Soyoil has lost some market share in the country as a result of the changes in import duty. "Therefore, the premium of soyoil over palmolein is unlikely to test its earlier fat levels. It is more likely that soyoil and palmolein will trade very close to each other," Mistry said, adding, biodiesel would be another factor that would keep prices of vegetable oils under pressure. 
 

SKY-HIGH Production & consumption of oilseed
In '000 tonne	Production		Consumption
	2005-06	2006-07*	2005-06*	2006-07*
Soybean oil	1,140	1,100	2,850	2,200
Cotton oil	755	825	720	825
Groundnut oil	950	700	1,020	700
Sun oil	620	600	680	800
Rapeseed oil	2,250	2,150	2,250	2,150
Sesame oil	125	120	160	120
RiceBranoil	660	700	650	700
Others	600	605	3,950	5,365
Total	7,100	6,800	12,280	12,860
* Estimates

"The recent forecast by Goldman Sachs predicts that mineral oil demand in 2007 will outstrip supply and that crude oil prices will average to $72.5 a barrel. Unless the world economy slips into recession, there is room for biodiesel to expand even faster than my prognosis," he said.

According to him, the country's imports in the next year are likely to be about 1 mt higher than the previous year. The country would import almost 1.5 mt more of palm as compared with the previous year. The greater reliance on palm oil would have significant bearing on the price outlook for palm products, he added.

"I believe 2007 will be the year when India will once again emerge as a major factor in palm oil pricing," said Mistry.

"There is a strong possibility that sometime in May, the government will make one more reduction to bring palm import duty rates down to 50 per cent in keeping with its offer for a Free Trade Agreement with Asean," he added.

Bloomberg adds: Sales of palm oil, 85 per cent of which is grown in Southeast Asia, have been surging in China and India, the world's two most populous nations. The oil is used in foods and, increasingly, as an additive that is blended with regular fuels.

"China continues to be hungry, and is booting imports of oils and fats in general,'' said Thomas Mielke, chief editor of 'OilWorld', the trade publication. Mielke is forecasting a price of as much as 2,250 ringgit a tonne in the second half.