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Crude palm oil (CPO) prices are expected to rule weak in the near term till year-end on rising stocks in Malaysia and Indonesia.
Though the short-term outlook remains bearish, the demand for palm oil is expected to pick up next year on anticipated fall in global oilseeds output, analysts and industry observers said at the Malaysian Palm Oil Trade Fair and Seminar, organised by the Malaysian Palm Oil Council.
Dorab E. Mistry, , Godrej International Ltd Director, said that CPO will touch a low of 2,200 Malaysian ringitt (MYR) in the next three months as stocks build up in the second largest producer.
CPO prices are trading around 2,465 MYR or $810 levels. Mistry advised Malaysia to remove all export taxes and quotas on short term basis and allow prices to touch level of 2,200 MYR a tonne or $749 c.i.f Rotterdam to help reduce rising stocks and overcome the current crisis.
“If prices are held artificially high, it could be counterproductive and stocks could build further,” Mistry said.
Malaysia was recently forced to announce a duty cut effective January 1 to make its CPO exports competitive and on par with larger rival Indonesia.
Benny Lee, Chief Market Strategist at Jupiter Securities Sdn Bhd, said that CPO prices will stay bearish in the near term on rising stocks in Malaysia, which are expected to touch three million tonnes by December-end from the present 2.48 mt.
James Fry, LMC International Chairman, said that the recently announced duty cuts and abolition of export quotas coupled with the emergence of price-sensitive bio-fuel demand should stop the rising stocks from December.
The rising crude oil prices, which were hovering around $116 a barrel, could possibly trigger the demand for bio-fuel palm diesel, he said.
Fry said that the production of palm oil in Indonesia will continue to rise as newer plantation areas are expected to come into production.
At the same time, Malaysian output is seen marginally declining to around 18 mt, while the Indonesian output is pegged at 27.5 mt for the current year.
Thomas Mielke, Head of Hamburg-based research firm Oil World, expressed optimism that global demand for oil palm will continue to grow going forward. He suggested that the key oil palm producing nations – Indonesia and Malaysia should not slow down planting of oil palm.
Mielke estimated that the world market needs about 78 mt oil palm by 2020 compared with 52 mt at present.
The anticipated shortfall in oilseed production will see demand for palm oil in 2013, he said.
(The correspondent's visit was sponsored by Malaysia Palm Oil Council)
>vishwanath.kulkarni@thehindu.co.in
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