Weaker growth in Southeast Asian palm oil production and normal demand expansion will set the stage for a bull market next year, leading industry analyst -Dorab Mistry said on Friday. "For the next one year it will be a tug of war between bullish fundamentals and a somewhat uncertain macro economic situation. I am backing the tight fundamentals to prevail," he told the Indonesian Palm Oil Conference and Price Outlook in Bali island.
His forecast is the most bullish among traders, producers and analysts that Reuters spoke to. An earlier survey of 13 respondents at the conference showed that average palm oil prices are likely to fall to 3,115 ringgit ($990) a tonne next year, from 2011's record average, on expectations of output recovery after a spell of erratic weather and a bleak global economic outlook. Mistry, who heads the trading desk for India's Godrej International, said he was maintaining an earlier forecast that Malaysian palm oil will hit 4,000 ringgit ($1,300) by June 2012 on strong demand chasing tight supply.
He also stuck to a short term forecast for palm oil to hit 3,300 ringgit in January on output made worse by top producers Indonesia and Malaysia entering a "flat phase" in the oil palm biological cycle that lasts between six and nine months.
"After my speech in China on November, crude palm oil futures did make a dash towards 3,300 ringgit. This was clearly premature and the bad macro situation has pulled them back," he said. "The market needs to see confirmation of lower production and strong exports in order to make a sustainable move higher. I believe that will happen in December," he added.
Mistry said Malaysian crude palm oil production for next year will be more or less flat at 18.6-18.9 million tonnes, compared to his 2011 forecast of 18.8 million tonnes. For the first ten months, output touched 15.8 million tonnes, industry data showed. Indonesia fares a little better only because of new acreage. Mistry pegged 2012 Indonesian production at 26.5 million tonnes compared to this year's forecast of 25.2 million tonnes. The Southeast Asian country does not issue data like Malaysia.
Mistry said demand from India, the world's largest palm oil buyer, would likely continue to expand as long as prices of refined, bleached and deodorised palm olein used in cooking oil remain around $1,100 FOB or $1,300 landed cost next year. This represents a rise from the $1,200 landed cost forecast this year that Mistry calls the "Indian biting point" or the maximum price at which price-sensitive buyers are comfortable to with before they cut back on purchases.
"With food price inflation still strong and the economy growing at a minimum of seven percent even in these difficult times, it is necessary that the Indian biting point be raised," he said. Food demand from India comes as the soy-exporting Americas push ahead with more aggressive biodiesel mandates, which will see Argentine soyoil maintain a premium of about $100 to $120 per tonne over crude palm oil.
Comments
Comments are closed for this article.