Despite the weak global outlook, edible oilseeds and oils prices are likely to appreciate 20 per cent in 2009 on rising palm oil demand from the food sector constituting 15 per cent of global consumption.
Demand from developing countries, including India and China is estimated to increase at a slower rate this year due to global economic recession. The Indian and Chinese economies are set to rise over 7 per cent in 2009 when developed countries are facing negative growth. Vegetable oil being closely linked with the economy, the growth of the sector is likely to be less affected when compared to other sectors.
Trend continues to remain positive on good buying support at the domestic physical market, feels Ajitesh Mullick of Religare Commodities.
According to latest estimates by Thomas Mielke, the executive editor of Germany-based leading publication ‘Oil World’, crude palm oil may surge 33 per cent to $660 per tonne in the first half of calendar year 2009 while much would depend on the behaviour of crude oil. Presently, crude palm oil is quoted around $450 (1,559 ringgit) per tonne on Bursa Malaysia’s Derivatives Exchange.
In our assessment, palm oil stocks, that peaked at the end of November in Malaysia and across the world, is set to decline sharply by March. The decline in production will be augmented by the reduction of the biological yield cycle. Apparently, world demand of palm oil will pick up and more palm oil will be needed to offset the decline in world soya oil export and usage, Mielke said.
The pace of decline in palm oil prices has slowed, compared with crude as the vegetable oil was one of the first commodities this year to feel the impact of the faltering global economy, tumbling 65 per cent since a March peak of 4,486 ringgit.
Vegetable oil markets move in tandem with crude oil as soyoil and rapeseed oil are heavily subsidised as feedstock for biodiesel, which competes directly with petroleum diesel.
In contrast, B V Mehta of the Solvent Extractors’ Association said much will depend upon crude oil. Each time we consider the price as bottomed out, it touches a fresh low. Therefore, we cannot assume any price rise in edible oils unless crude oil settles between $60-80 a barrel. Currently, crude oil is hovering below $40 a barrel.
Vegetable oil markets move in tandem with crude oil as soyoil and rapeseed oil are heavily subsidised as feedstock for biodiesel, which competes directly with petroleum diesel.
When most of the supplies in the northern hemisphere will have been disposed of, prices of sunflower seed and oil should appreciate from the current attractive levels, also due to the prospective sharp decline in Argentine sunflower crop to only 3.4-3.6 (4.4) million tonnes early 2009.
Soy oil is expected to jump to $940 against the current price of $690 per tonne while soybean prices are likely to appreciate 20 per cent to $420 per tonne.
