MARKET DEVELOPMENT
Rabo, StanChart Downplay Risk of Palm Price Hiccup
Rabo, StanChart Downplay Risk of Palm Price Hiccup
13/06/2013 (Agrimoney.com) - Rabobank and Standard Chartered voiced cautious support for palm oil prices hanging on to recent gains despite clashing over prospects for imports by China, a major buyer, whose purchases have proved unexpectedly firm so far in 2013.
Rabobank warned that a rise of 23% in Chinese palm oil imports in the first seven months, to April, of the 2012-13 marketing year boded ill for future import prospects, seeing the supplies as going to build up inventories.
"Higher levels of stock in China limit import potential in coming months," Rabobank said, saying inventories had topped 1m tonnes last month.
'Strong demand from China'
The comments contrasted with a forecast from Standard Chartered analyst Abah Ofon that China imports will remain strong, after so far in 2013 deying downbeat expectations that a jump in buy-ins late last year was a one-off surge to beat a change in vegetable oil import restrictions.
"Initial comments from China's customs agency suggest that the pace of vegetable imports was maintained in May," Mr Ofon said.
"Should this be confirmed, we now expect strong demand from China in June and July," typically strong months for Chinese purchases.
"China's crude palm oil imports have increased in the month of June in all of the past four years, and in July in two of the past four years."
'Lacklustre production growth'
The banks, while also cautioning over production threats, struck different notes here two, with Rabobank stressing the "lacklustre" growth in output from Malaysia, the second-ranked producing state, in what is typically a time of seasonally increasing productivity.
"May production was below the five-year average for the first time since June 2012," Rabobank said.
Mr Ofon, meanwhile, flagged worse production prospects in top-ranked Indonesia, for which the Indonesian Palm Oil Board has downgraded its output forecast this year by 2m tonnes to 28m tonnes.
"Indonesia is likely to account for most of the global growth in crude palm oil supply this year, and we believe that its 2mt production cut will stem any sustained decline in crude palm oil prices."
'Continue To Support Prices'
Indeed, Mr Ofon forecast a recovery in palm oil prices to an average of 2,600 ringgit a tonne in the July-to-September quarter, if a downgrade from his previous estimate of 2,750 ringgit a tonne, with futures on the Kuala Lumpur exchange averaging 2,750 ringgit a tonne in the October-to-December period.
"We continue to expect palm oil demand to outpace supply this year, especially given an expected shortfall in global edible oil supply in the 2012-13 season," he said.
Rabobank said that a drawdown in Malaysian palm oil stocks would continue "in coming months, which will continue to support prices".
Prices will also gain support from buying ahead of next month's Ramadan festival in Islamic countries, the bank said.
Palm oil futures eased 0.2% to 2,451 ringgit a tonne in Kuala Lumpur on Wednesday, extending a recovery from the 2,230 ringgit a month reached last month, among the lowest prices in three years.
Rabobank warned that a rise of 23% in Chinese palm oil imports in the first seven months, to April, of the 2012-13 marketing year boded ill for future import prospects, seeing the supplies as going to build up inventories.
"Higher levels of stock in China limit import potential in coming months," Rabobank said, saying inventories had topped 1m tonnes last month.
'Strong demand from China'
The comments contrasted with a forecast from Standard Chartered analyst Abah Ofon that China imports will remain strong, after so far in 2013 deying downbeat expectations that a jump in buy-ins late last year was a one-off surge to beat a change in vegetable oil import restrictions.
"Initial comments from China's customs agency suggest that the pace of vegetable imports was maintained in May," Mr Ofon said.
"Should this be confirmed, we now expect strong demand from China in June and July," typically strong months for Chinese purchases.
"China's crude palm oil imports have increased in the month of June in all of the past four years, and in July in two of the past four years."
'Lacklustre production growth'
The banks, while also cautioning over production threats, struck different notes here two, with Rabobank stressing the "lacklustre" growth in output from Malaysia, the second-ranked producing state, in what is typically a time of seasonally increasing productivity.
"May production was below the five-year average for the first time since June 2012," Rabobank said.
Mr Ofon, meanwhile, flagged worse production prospects in top-ranked Indonesia, for which the Indonesian Palm Oil Board has downgraded its output forecast this year by 2m tonnes to 28m tonnes.
"Indonesia is likely to account for most of the global growth in crude palm oil supply this year, and we believe that its 2mt production cut will stem any sustained decline in crude palm oil prices."
'Continue To Support Prices'
Indeed, Mr Ofon forecast a recovery in palm oil prices to an average of 2,600 ringgit a tonne in the July-to-September quarter, if a downgrade from his previous estimate of 2,750 ringgit a tonne, with futures on the Kuala Lumpur exchange averaging 2,750 ringgit a tonne in the October-to-December period.
"We continue to expect palm oil demand to outpace supply this year, especially given an expected shortfall in global edible oil supply in the 2012-13 season," he said.
Rabobank said that a drawdown in Malaysian palm oil stocks would continue "in coming months, which will continue to support prices".
Prices will also gain support from buying ahead of next month's Ramadan festival in Islamic countries, the bank said.
Palm oil futures eased 0.2% to 2,451 ringgit a tonne in Kuala Lumpur on Wednesday, extending a recovery from the 2,230 ringgit a month reached last month, among the lowest prices in three years.