MARKET DEVELOPMENT
Malaysian Palm Prices Seen Capped at 3,000 Rgt by Mid-2014 -Analyst Fry
Malaysian Palm Prices Seen Capped at 3,000 Rgt by Mid-2014 -Analyst Fry
06/03/2014 (Reuters) - Malaysian crude palm oil futures could be capped at 3,000 ringgit per tonne by the middle of this year as a recent rally in prices prompts buyers to switch to rival edible oils, a top industry analyst said on Wednesday.
Benchmark Malaysian palm prices surged to a 17-month top of 2,860 ringgit ($870) on Monday amid crop damaging dry weather in Southeast Asia - extending gains of almost 10 percent in February, the biggest monthly rise since October 2013.
"If palm oil gets too 'greedy', we will see more importers switching to sun, soy and canola oils," James Fry said on the last day of a three-day industry conference in Kuala Lumpur.
Prices would, however, continue to be underpinned by higher biodiesel mandates and tighter palm oil stocks in top producers Indonesia and Malaysia, said Fry, who is the chairman of commodities consultancy LMC International.
Jakarta's energy ministry in August 2013 issued a new regulation to raise the minimum bio content in diesel to 10 percent, up from levels of 3-10 percent. For the power industry, the minimum was doubled to 20 percent.
Following this, Fry had estimated that crude palm oil prices would rise to 2,500 ringgit by February 2014 as inventories in Indonesia come down due to the biodiesel blending mandate.
He now expects Indonesia's palm stocks to drop at a faster-than-normal rate by mid-year as the drought in Southeast Asia hurts the region's output. Fry had previously forecast a drop to 1.8 million tonnes by February.
Malaysian inventories are seen dropping below 1.5 million tonnes by June, he added.
Stocks in Malaysia currently stand around 1.93 million tonnes, a 27 percent drop from record highs of 2.63 million tonnes in December 2012. Indonesia does not publish official data on inventory levels, but industry officials estimate stocks at around 1.8 million to 2.2 million tonnes. ($1 = 3.2750 Malaysian ringgit)
Benchmark Malaysian palm prices surged to a 17-month top of 2,860 ringgit ($870) on Monday amid crop damaging dry weather in Southeast Asia - extending gains of almost 10 percent in February, the biggest monthly rise since October 2013.
"If palm oil gets too 'greedy', we will see more importers switching to sun, soy and canola oils," James Fry said on the last day of a three-day industry conference in Kuala Lumpur.
Prices would, however, continue to be underpinned by higher biodiesel mandates and tighter palm oil stocks in top producers Indonesia and Malaysia, said Fry, who is the chairman of commodities consultancy LMC International.
Jakarta's energy ministry in August 2013 issued a new regulation to raise the minimum bio content in diesel to 10 percent, up from levels of 3-10 percent. For the power industry, the minimum was doubled to 20 percent.
Following this, Fry had estimated that crude palm oil prices would rise to 2,500 ringgit by February 2014 as inventories in Indonesia come down due to the biodiesel blending mandate.
He now expects Indonesia's palm stocks to drop at a faster-than-normal rate by mid-year as the drought in Southeast Asia hurts the region's output. Fry had previously forecast a drop to 1.8 million tonnes by February.
Malaysian inventories are seen dropping below 1.5 million tonnes by June, he added.
Stocks in Malaysia currently stand around 1.93 million tonnes, a 27 percent drop from record highs of 2.63 million tonnes in December 2012. Indonesia does not publish official data on inventory levels, but industry officials estimate stocks at around 1.8 million to 2.2 million tonnes. ($1 = 3.2750 Malaysian ringgit)