Edible oil prices are likely to rule bearish next season starting October as supplies exceed demand but the fall could be stopped by factors such as bio-fuel demand, experts at a global vegetable oils meet said on Sunday.
Crude palm oil prices in Malaysia may not drop below 2,000 ringgit as long as crude oil prices rule above $100 a barrel and the South American soyabean crop turns out to be poor, according to Dorab Mistry, Director of Godrej International.
Presenting global vegetable oil price outlook for 2013-14 at Globoil India 2013, he said palm oil could drop to 2,200 ringgit in the next few weeks and will range between 2,200 ringgit and 2,300 ringgit until the year-end.
Stating that growth in vegetable oils production this year will outstrip that of consumption, he said that while 7.1 million tonnes (mt) will be added to the supplies, demand will increase only by three million tonnes.
The high cycle for palm oil production, which began this month, will continue until April and it would result in Malaysian palm oil production rising to 19.2 mt during 2013-14 season starting next month.
Indonesia’s production would be 29.5 mt against 28 mt, he said.
“Palm oil will face pressure from soyabean and sunflower oil this year,” he said.
Referring to the Indian situation, he said India would import 11 mt next year against 10.6 mt this year.
However, palm oil imports would be stagnant, while shipments of soyabean and sunflower oils into the country will increase.
“Oil refiners get more profit from soyabean and sunflower compared to palm oil. Also, the export duty differential in Malaysia and Indonesia is against them in a falling market,” he said.
Mistry said soyabean oil prices could tend to drop around Christmas time if South America gets good rain. Before that, it could rule lower between now and November.
“Again in early June, prices could begin dropping. For now, they will rule flat,” he said.
The Godrej International Director also said that Indonesia had planted oil palm trees on at least 6,00,000 hectares last year as palm oil prices ruled around $1,000 a tonne.
Demand for vegetable oils next year would come from bio-fuel besides food. “Indonesia wants to raise use of bio-fuel to 10 per cent from seven per cent. We have to see how that turns out,” he said, adding that demand for bio-fuel would increase 2 million tonnes next year.
Earlier, Thomas Mielke, Editor-in-Chief, Oil World, said that the outlook for vegetable oils is bearish for the next season.
Demand last year was 183.9 mt and it could rise another six million tonnes next year.
However, supplies will be higher by at least 9 million tonnes next year.
Soyabean oil could drop to levels of $800 a tonne in Europe, where palm oil could be traded at $730 (2,300 ringgit).
On Friday, crude palm oil December contracts on Bursa Malaysia Derivatives Exchange closed at 2,297 ringgit a tonne.
Soyabean oil for delivery in December is quoted at $930 a tonne.