MARKET DEVELOPMENT
Palm Prices Must Ease to Cope with Bumper Edible Oil Supplies - Mistry
Palm Prices Must Ease to Cope with Bumper Edible Oil Supplies - Mistry
* Prices should trade between 1,900 rgt over next few weeks
* Resilient younger palms may see bigger CPO supply
* Palm stocks may peak in December
* Global oilseed supplies to grow by 7.6 mln T
15/08/2014 (Reuters) - Palm oil prices should ease towards 1,900 ringgit ($594) over the next few weeks in order to stay competitive and recapture market share from rival vegetable oils, leading analyst Dorab Mistry said on Monday, as prospects of bigger supplies looms.
Benchmark palm prices <0#FCPO:> were earlier predicted to range between 2,300-2,500 ringgit from end-June, but instead chalked up losses of more than 20 percent over July and August, and on Sept. 2 plunged to a March 2009 low of 1,914 ringgit.
Mistry said the drop was caused by projections of record U.S. soybean crops alongside rising supplies of other oilseeds, as well as surprisingly strong crude palm output after an anticipated El Nino weather pattern in Asia did not materialize.
Palm prices on the Bursa Malaysia Derivatives (BMD) have since pulled up to around 2,110 ringgit, helped by Malaysia's decision to scrap export duties on the crude grade for September and October.
The uptick, however, further eroded palm's discount to substitute edible oils.
"I was aghast when BMD futures soared on the news and took away all competitiveness that was created by that abolition. Palm bulls made a huge mistake for short term gain," Mistry said at a palm oil seminar in Shanghai.
"I believe BMD futures on the third month should trade for the next several weeks towards the cost of production and strive to regain competitiveness," he added. "In the first instance that translates to a BMD third month price of 1,900 ringgit."
Prices, however, will unlikely dip below cost of crude palm oil production, Mistry said.
Argentina soyoil prices at port were seen between $730-750 from October to December.
STRUGGLE WITH BIGGER SUPPLIES
The unexpected resilience of younger palms to patches of dry weather in the first half of 2014 have paved the way for bigger supplies of the tropical oil, which could push up end-stocks to peak in December, said Mistry.
Mistry, who heads the vegetable oil trading arm at India's Godrej Industries said his estimates of Malaysian crude palm oil output to range between 19.7-19.9 million tonnes this year will likely have to be raised.
"Similarly I believe Indonesian plantations are playing out of their socks and their production is better than forecast," he said. He had earlier forecast Indonesia's production at 30.5 million tonnes this year.
Stockpiles in Malaysia, the world's No.2 palm producer after Indonesia, jumped 22 percent to a more-than-a-year high of 2.05 million tonnes at end-August, after favourable weather boosted production.
The development of a mild El Nino in Southeast Asia in October onwards could also lead to good rainfall over South American soy crops, Mistry said.
"So on top of a huge U.S. soybean crop, we are likely to face big crops from Brazil and Argentina, with Brazilian beans likely to be available for export as early as January 2015."
The World Meteorological Organization said it now sees less chance of El Nino conditions forming this year than it did three months ago, and expects only a weak El Nino event if it occurs at all.
Mistry sees global oilseed supplies to increase by 7.6 million tonnes for the year to September, up from a 6.8 million tonnes rise previously estimated. Forecasts for growth in global demand for edible oils were also lifted to 5.2 million tonnes from 5.0 million tonnes.
He added that while palm oil imports from top cooking oil buyer India climbed to an "astronomical" 1.34 million tonnes in August and could stay above 1 million tonnes in September, imports from China, however, could remain thin over the next three months.
But Brazil's decision to raise its bio content in diesel to 7 percent from November onwards is "the one big silver lining" to the edible oil demand scene, Mistry said.
The mandate, which was initially lifted from 5 percent to 6 percent in July, had helped stoke soy-based biodiesel exports from Argentina to new highs, he said.
($1 = 3.196 Malaysian Ringgit)
* Resilient younger palms may see bigger CPO supply
* Palm stocks may peak in December
* Global oilseed supplies to grow by 7.6 mln T
15/08/2014 (Reuters) - Palm oil prices should ease towards 1,900 ringgit ($594) over the next few weeks in order to stay competitive and recapture market share from rival vegetable oils, leading analyst Dorab Mistry said on Monday, as prospects of bigger supplies looms.
Benchmark palm prices <0#FCPO:> were earlier predicted to range between 2,300-2,500 ringgit from end-June, but instead chalked up losses of more than 20 percent over July and August, and on Sept. 2 plunged to a March 2009 low of 1,914 ringgit.
Mistry said the drop was caused by projections of record U.S. soybean crops alongside rising supplies of other oilseeds, as well as surprisingly strong crude palm output after an anticipated El Nino weather pattern in Asia did not materialize.
Palm prices on the Bursa Malaysia Derivatives (BMD) have since pulled up to around 2,110 ringgit, helped by Malaysia's decision to scrap export duties on the crude grade for September and October.
The uptick, however, further eroded palm's discount to substitute edible oils.
"I was aghast when BMD futures soared on the news and took away all competitiveness that was created by that abolition. Palm bulls made a huge mistake for short term gain," Mistry said at a palm oil seminar in Shanghai.
"I believe BMD futures on the third month should trade for the next several weeks towards the cost of production and strive to regain competitiveness," he added. "In the first instance that translates to a BMD third month price of 1,900 ringgit."
Prices, however, will unlikely dip below cost of crude palm oil production, Mistry said.
Argentina soyoil prices at port were seen between $730-750 from October to December.
STRUGGLE WITH BIGGER SUPPLIES
The unexpected resilience of younger palms to patches of dry weather in the first half of 2014 have paved the way for bigger supplies of the tropical oil, which could push up end-stocks to peak in December, said Mistry.
Mistry, who heads the vegetable oil trading arm at India's Godrej Industries said his estimates of Malaysian crude palm oil output to range between 19.7-19.9 million tonnes this year will likely have to be raised.
"Similarly I believe Indonesian plantations are playing out of their socks and their production is better than forecast," he said. He had earlier forecast Indonesia's production at 30.5 million tonnes this year.
Stockpiles in Malaysia, the world's No.2 palm producer after Indonesia, jumped 22 percent to a more-than-a-year high of 2.05 million tonnes at end-August, after favourable weather boosted production.
The development of a mild El Nino in Southeast Asia in October onwards could also lead to good rainfall over South American soy crops, Mistry said.
"So on top of a huge U.S. soybean crop, we are likely to face big crops from Brazil and Argentina, with Brazilian beans likely to be available for export as early as January 2015."
The World Meteorological Organization said it now sees less chance of El Nino conditions forming this year than it did three months ago, and expects only a weak El Nino event if it occurs at all.
Mistry sees global oilseed supplies to increase by 7.6 million tonnes for the year to September, up from a 6.8 million tonnes rise previously estimated. Forecasts for growth in global demand for edible oils were also lifted to 5.2 million tonnes from 5.0 million tonnes.
He added that while palm oil imports from top cooking oil buyer India climbed to an "astronomical" 1.34 million tonnes in August and could stay above 1 million tonnes in September, imports from China, however, could remain thin over the next three months.
But Brazil's decision to raise its bio content in diesel to 7 percent from November onwards is "the one big silver lining" to the edible oil demand scene, Mistry said.
The mandate, which was initially lifted from 5 percent to 6 percent in July, had helped stoke soy-based biodiesel exports from Argentina to new highs, he said.
($1 = 3.196 Malaysian Ringgit)