KUALA LUMPUR: The lukewarm reception at the Palm Oil Trade Seminar (POTS) Kuala Lumpur 2016 was a given.
Global vegetable oil analysts gave mixed forecast on palm oil prices in the months ahead.
In the first 10 months of the year, palm oil futures on Bursa Malaysia Derivatives Market averaged at around RM2,500 per tonne.
Hamburg-based ISTA Mielke GmbH executive director Thomas Mielke, foresees palm’s price rally to resume from now until early 2017.
“The El Nino drought phenomenon is over but we still see yields continue to fall this year.
“Malaysia’s oil palm yield is expected to drop 10 per cent to 17.8 million tonnes. Over at Indonesia, I see a 4 per cent cut to 32.2 million tonnes,” he said.
Mielke noted as global stocks for palm oil come down further, prices would rise higher.
“Palm oil prices are likely to resume rally until early 2017. It should rise to between RM2,900 and RM3,000 per tonne by then,” Mielke said.
CIMB Investment Bank senior plantation stocks analyst Ivy Ng concurred with Mielke. She said Malaysia’s palm oil output is likely to fall by 10 per cent to around 18 million tonnes this year.
However, she was a little less optimistic than Mielke, forecasting palm oil to trade between RM2,400 and RM2,800 per tonne for the rest of the year.
“My forecast is based on the assumption the ringgit remain at the current level of RM4.15 to US$1.00,” she said.
Apart from weather worries, higher use of palm-based biodiesel by Indonesia could tighten supplies of the tropical oil from the world’s top exporter.
“For the whole of 2016, Indonesia, the world’s biggest palm oil producer and exporter, is expected consume 2.5 million tonnes palm biodiesel,” she said.
LMC International Ltd chairman Dr James Fry, who took the stage next, reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices.
“When vegetable oil prices approach that of petroleum, biodiesel production and direct burning of vegetable oils become increasingly attractive options. This creates a floor price,” Fry said.
“If palm oil prices were to go higher to US$700 per tonne and the Brent crude oil remain at US$45 a barrel, Indonesia’s Estate Crop Fund is only able to finance 2 million tonnes of palm biodiesel,” he added.
Next, Godrej International director Dorab Mistry, noted that the El Nino-inspired bull market was short-lived as palm oil prices had only risen as high as RM2,800 per tonne.
“I know plantation companies in Malaysia and Indonesia are not very happy. Buyers in India have been buying soybean and crude soy oil instead of palm oil,” he said.
“Palm oil prices need to fall to as low as RM2,200 per tonne from the current RM2,600 for India’s palm oil purchase to pick up,” Dorab said, pessimistically.
The seminar which drew about 900 participants was organised by the Malaysian Palm Oil Council (MPOC).