Production shortfall expected in second half-year

10/03/2010 (The Star Online), Kuala Lumpur - Crude palm oil (CPO) futures on Bursa Derivatives Exchange will likely be traded at RM2,800 to RM3,200 per tonne after July as the El Nino hot weather may result in a production shortfall in the second half of this year, said international palm oil expert Dorab Mistry.

Mistry, who is Godrej International head of vegetable oil trading, expects the bullish sentiment in palm oil would run from the second half of this year until the first quarter of next year.

He told participants at the first day of the 21st Palm and Laurics Oil Conference and Exhibition: Price Outlook 2010/2011 (POC 2010) organised by Bursa Malaysia yesterday that CPO prices would be trading in the range of RM2,600 to RM2,800 per tonne between March and July due to high vegetable oil stocks.

“I believe the palm oil market has a comfortable cushion of stocks for the next few months and this will be supported by large soybean oil supplies from South America,” he said.
 
Mistry, whose forecasts are keenly watched, had earlier said that price of CPO could rise to RM2,800 to RM3,000 per tonne by the end of the first quarter of 2010 on higher global demand.

Earlier, Commodities CME Group managing director of agricultural products and services Timothy J.Andriesen announced that the new US dollar-denominated palm oil futures contract is scheduled to be launched in Kuala Lumpur on May 24 and in Chicago on May 23.

He said the US dollar-denominated palm oil futures contracts were expected to be traded on the CME Globex.

“It is an outstanding development. I think it will increase the portfolio of contract in the palm oil industry on a global basis,” adds Attunga Capital Pty Ltd portfolio manager Phillip Pyle.

Meanwhile, Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff welcomed palm oil futures trading at the Indonesia Commodity & Derivatives Exchange starting next month.

“We welcomed more competition because we like to see the profile of palm oil contracts to be raised internationally.

“We are quite confident, however, that our CPO futures (FCPO) contract will remain the global price benchmark for CPO and large proportion of traders will still trade here due to our established track record of almost 30 years.

“We are expecting similar growth of 33% in FCPO contracts this year,” he said.

The Bursa Malaysia Derivatives Exchange recorded a 33% increase or four million contracts in its FCPO contracts in 2009 compared with 2008.

At the official launch of POC 2010, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said Malaysia, the world’s second largest palm oil exporter, is confident of surpassing its total palm oil products exports in 2009 of RM49.59bil this year.

He said the average CPO price this year was expected be better than last year given increasing production and demand.

“The country is expected to meet the 18.1 million tonnes in palm oil production this year,” he added.Palm oil production in Malaysia stood at 17.6 million tonnes last year.

Dompok said the value of palm oil product export declined by 24.4% to RM49.59bil last year due to lower average CPO price of RM2,244.50 per tonne compared with RM2,856.08 per tonne in 2008.

“But, in the terms of quantity, exports of Malaysian palm oil products increased by 2.9% last year.”

Dompok said the industry’s challenges included limited suitable land, labour shortages and demand from global market for sustainably produced palm oil.