KUALA LUMPUR (March 20 2003) : Malaysia's crude palm oil futures arelikely to fall to 1,100 ringgit ($289) a tonne by September due to risingdomestic stocks and the arrival of South American soya crop, a leadingIndian trader said on Wednesday.

"I expect stocks of soyaoil to build up in South America from July onwardsand exert pressure on palm," Dorab Mistry, director of GodrejInternational Ltd, told an international edible oils conference in KualaLumpur.

"Palm oil stocks in Malaysia can reach 1.5 million tonnes in November andhence by September, we could see MDEX at between 1,100 and 1,200 ringgit,"said Mistry referring to the Malaysian Derivatives Exchange (MDEX), whichtrades crude palm oil.

At the close on Tuesday, the benchmark third-month futures contract, June,closed three ringgit down at 1,477 ($388.68) a tonne, off the day's low of1,467 ringgit.

"A bigger dip of about 100 ringgit on CPO can be expected by the end ofMarch. By the end of May, we should expect prices to erode by a further100 ringgit," said Mistry, whose comment is widely watched the market.

"The MDEX should be able to hold at a level of 1,300 to 1,400 until thebig increases in stock levels which will commence from June-July onwards,"he said.

Malaysia's end-March palm oil stocks were expected to reach 1.03 milliontonnes, still above the psychological level of one million tonnes,compared with the official 1.09 million tonnes at end-February, saidtraders.

Traders said stocks were expected to fall further to 920,000 tonnes atend-April and 835,000 tonnes at end-May, before picking up from Juneonwards.

Malaysia is the world's largest palm oil grower, producing 11.91 milliontonnes of palm oil in 2002, up from 11.80 million tonnes in 2001.

Its production was expected to reach 12 million tonnes in 2003, accordingto the government.

"Starting from April 2003, South America will produce at least 12 milliontonnes more soyabeans. The crop is about to be harvested. If we havenormal weather in USA, we could produce about two million tonnes moredespite lower acreage," said Mistry.

"My guess is that we have entered an 18-month bear market which will lastwell into 2004. In a few months time, plantations will look back on thecurrent lucrative price levels with nostalgia," he said.

"The MDEX is your life boat. Remember there were not enough life boats onthe Titanic. Before long, there may not be enough buyers at today's priceson the MDEX," he added.- Reuters