12/10/2011 (The Edge) - The catalyst for a strong rebound in crude palm oil (CPO) prices in the near term is still nowhere in sight, even though demand is expected to increase in the coming months due to festive seasons, say those monitoring the commodity.

“I think exports to India [the largest buyer of palm oil in the world] are going to pick up this month with Deepavali coming, but the global economic uncertainties could still weigh on the overall demand and prices for the commodity,” Pong Teng Siew, Jupiter Securities head of research, told The Edge Financial Daily.

Malaysia, the world’s second largest palm oil producer, saw its total palm oil stock rise to 2.12 million tonnes in September, the highest level since December 2009, according to data released by the Malaysian Palm Oil Board  (MPOB) yesterday.

The increase comes at a time of global economic uncertainties on worries the US economy is faltering and the eurozone slipping into recession.

“No doubt, the uncertainties in the global economy, such as the eurozone crisis and the bleak economic outlook for the US, could threaten the outlook of the palm oil price. In the short term, I am looking at a price level of RM2,700 to RM2,900 a tonne. It would need another ‘significant push’ for the price to trade above RM3,000 in the near future,” said Ker Chung Yang, commodity analyst with Singapore’s Philip Futures Pte Ltd.

He added that the key concern for the palm oil industry in 4Q11 would be the return of the La Nina weather pattern, which brings heavy rain to this part of the world.

“Despite the fact that weather experts have said the coming La Nina may be weaker than last year, we would expect this to create some supply constraints, which would then limit rising stock levels,” he said.

Plantation stocks took a hit following the release of the data by the MPOB. Among the top 10 losers on Bursa Malaysia yesterday were United Plantations Bhd, which shed 30 sen to RM16.88, Kuala Lumpur Kepong Bhd down 28 sen to RM20.34, Chin Tek Plantations Bhd dropping 20 sen to RM7.90 and Sime Darby Bhd losing 12 sen to RM8.40.

According to MPOB data, palm oil output rose 12.1% to 1.87 million tonnes in September from 1.67 tonnes in August. Exports fell 8.8% to 1.54 million tonnes in September from 1.69 million tonnes a month earlier.

Jupiter’s Pong said the increase in stockpile this month could stem from workers coming back after the Hari Raya Aidilfitri season.

He said although demand is expected to pick up in the months ahead, Malaysia could still face strong price competition from Indonesia, the largest palm oil producer in the world, in terms of palm oil exports to India and Pakistan.

“These markets are price sensitive due to their larger lower income group populations,” said Pong. In terms of China, he said palm oil is still far from matching the position soyabean oil has garnered there.

“Demand from the eurozone is going to be mild with the sovereign debt crisis still going on. Perhaps exports to the Middle East could fill the gap from Europe, and Malaysia could move in to export more to that region.”

Nonetheless, palm oil exports have started to pick up this month.

According to a Reuters report, cargo surveyor Intertek Testing Services reported a 31.8% jump in Malaysian palm oil exports in the first 10 days of this month to 496,918 tonnes, from the same period a month ago. Crude palm oil shipments alone were up 63.3%.

CPO price for December delivery yesterday rose RM21 to close at RM2,793 a tonne from RM2,772 on Friday.