KUALA LUMPUR: There is slight optimism that palm oil would trade higher at between RM2,200 and RM2,500 per tonne, as analysts see higher global biodiesel consumption across Indonesia, Malaysia, Thailand and Colombia.
Since the beginning of the year until now, palm oil futures on Bursa Malaysia Derivatives Market averaged at around RM2,100 per tonne.
LMC International Ltd chairman Dr James Fry at the 30th Palm and Lauric Oils Price Outlook Conference and Exhibition (POC2019) here today reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices.
While seeing higher biodiesel consumption across these countries, Fry said since February 2019, Malaysia’s fuel stations switched to B10 biodiesel from B7 diesel blend, using more palm oil in the transport industry.
POC2019 saw about 2,000 vegetable oil traders, planters, investors and analysts from around the world sharing their knowledge on global palm oil industry trends.
As long as the Organisation of the Petroleum Exporting Countries (OPEC) and the US shale oil producers collectively support Brent crude oil at between US$60 and US$65 per barrel, Fry forecasts palm oil to go on trading at between RM2,240 and RM2,360 per tonne.
Fry at the event presented his paper entitled ‘Tying together Supply and Demand, Politics and Petroleum in today's World of Oil Palm.'
Oil World executive director Thomas Mielke concurred with Fry that global demand for palm oil is starting to pick up on higher biodiesel mandates.
“I do see higher palm oil consumption on higher biodiesel demand. There is upward potential in palm oil prices to trade between US$580 and US$600 per tonne (or RM2,350 and RM2,450) in the next six months,” he said.
Mielke noted the European Union (EU) has been trying to block palm oil shipments from developing Africa and Asia into Europe.
The European Commission, which is the executive arm of the EU, had singled out palm biofuels to be ‘high risk’ in terms of ‘indirect land use change’ in ‘high carbon stock’ areas and therefore should be excluded from Europe’s transport use.
Mielke, a well-respected and authoritative vegetable oil analyst, rejected the EU’s biased policies that discriminates palm oil.
“I urge all of us to stand up against discrimination and the EU's intention to ban palm biodiesel. We should, perhaps, even go on the offensive with the EU on this unfair move,” he said.
“The world needs more palm oil. In order to satisfy the daily oils and fats need of an increasing global growing population for the next decade or so, farmers here need to speed up on their oil palm replantings with higher yielding strains,” Mielke added.
At the POC2019, many palm oil exporters expect supply would be slightly capped by the ongoing mild El Nino phenomenon and look to Indonesia’s increasing biodiesel mandate for price support.
Since July 2015, the world's top palm producer began collecting a US$50 per tonne levy on crude palm oil exports to fund higher biodiesel subsidies. Known as the Indonesian Estate Crop Fund, it subsidises biodiesel that is being retailed by national oil company PT Pertamina.
PT. Triputra Agro Persada President Commissioner Arif P. Rachmat reiterated Indonesia’s palm biodiesel mandate is price supportive.
“I foresee palm oil prices rise as demand go up due to my country raising biodiesel mandate and consuming as much as 6.2 kilo litres, this year,” he said.
“I think palm oil would trade at between US$550 and US$600 (or RM2,250 and RM2,460) per tonne as global demand start to pick up,” Arif told more than 2,000 delegates which include vegetable oils traders at the conference that carried the theme ‘Manage uncertainties, Harvest global opportunities’ here today.