April 13, 2009

India early June veg. oil port stocks may rise up to 800,000 tons

Kuala Lumpur - India's vegetable oil inventories at ports may rise to an all-time high of 725,000-800,000 tons by early June if there is a downward correction in global prices - because buyers want to lock in supplies before an expected hike in import tariffs, a senior trading executive said Monday.

"The general perception is that that the new government may increase the import duty (on vegetable oils) and traders are keen to take delivery of as much oil as possible by June," said Srinivaas Sirigeri, managing director, Shakti Enterprises, a Mumbai-based importing company.

Indians go to the polls later this month and a new government is expected to take office in May. The annual budget is likely to be unveiled by July. At present, India doesn't levy any import tariff on crude vegetable oils.

Sirigeri said ports in India already have vegetable oil stocks of between 550,000 and 600,000 tons, including more than 425,000 tons of palm oil.

The biggest deterrent to heavy purchases during the next few months, however, could be high prices, he added.

Crude palm oil futures on Malaysia's derivatives exchange have increased by more than 18% so far this month.

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April 13, 2009

Global economic recovery to determine palm oil prices

Mumbai - Global economy which is likely to contract first time since the World war-II and trade to decline the most in the last 80 years has sent the commodity market under long bearish cyclic chain including palm oil. Crude Palm oil at Bursa Malaysian Exchange declined by more than 65 percent from its high of MYR 4500 a tonne registered around a year back.

Recently palm oil price has hit seven month high and quoting above MYR 2300 a tonne on lower stock which declined 13 percent to 1.36 million tons, lowest since July 2007. Analysts across the globe predicted the market to test higher level of MYR 2100-2400 a tonne earlier at vegetable oils conference in Kuala Lumpur in the second week of March. The market traded at MYR 1900 a tonne at that time. As the market almost reached the level predicted by a leading analyst, now it is aired with confrontation on the probable outlook of palm oil prices in the long-term. Industry personnel, traders and leading analysts have different views on prices for second half of the year.

Leading investment holding company of Malaysia recently released a report on the palm oil price outlook which expects the price to soften down in second half on recovery in palm oil supply. Palm oil output during the month of March has increased by 7.44 per cent at 1.28 million tonnes. The rise in output in March was the first month-on-month rise in four months and may signal that so-called tree stress after record output in 2008 is easing. The peak production cycle ahead is likely to keep prices down in the coming months. Mr. Dorab Mistry, leading analyst in Vegetable oil industry earlier at vegetable oils conference in Kuala Lumpur predicted the market to test MYR 1500 in the second half of the year.

However the Malaysia's IOI Corp, the world's third-largest listed palm oil producer, expect the price to test higher level of MYR 2600-2800 a tonne during the second half of the year. The major traders and industries from Malaysia also expect the CPO prices to remain firm on projection of current year production lower compared to last year’s level of 17.7 million tonnes. They also feel the demand not to remain down despite economy slow down as food articles are recession proof. With lower production and constant demand the price is likely to retain higher level.

Commodity prices have bottomed out and are likely to surge higher as said by Credit Suisse in its recent report. The leading analyst Thomas Mielke, editor-in-chief, Oil World, predicted the market to touch MYR 2400 a tonne in the fist half of the year. Another leading analyst Anne Frick also expect CPO price to move between MYR 1,700/ton and MYR 2,300/ton for the rest of the year.

However the prices to sustain at higher level, world economy must registered positive growth. Malaysian Palm Oil Board (MPOB) chairman Datuk Sabri Ahmad said that if the global economy recovers, China and the European Union (EU) - the world's top two buyers of palm oil of around 3.7 MT and 1.5 MT will help the prices to sustain higher level.

The supply side of the market will play important role compared to demand side in the short term. However global economic growth will largely determine the price of palm oil in the longer term.

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