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Friday, Mar 08, 2002

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Global edible oil prices to go up on low stocks

G. Chandrashekhar


A FURTHER modest decline in world edible oil stocks will push up prices and the seasonal peak is expected during July-September this year, much like last year.

The price rise expected to happen in the third quarter could push crude palm oil to (Malaysian Ringgit) RM 1,500 a tonne, according to Dr James Fry of LMC International, a London-based research organisation.

In his interesting paper at the MDEX price outlook meet here, Dr Fry pointed out the how vegetable oil prices were inversely related to stocks.

He forecast the world demand for vegetable oil to rise by 2.5 per cent equivalent to 2.9 million tonnes this year, but said additional supplies would be about 1.5 mt only, leading to a net decline in stocks to the extent of 1.4 mt.

Although the net global oilseeds output will expand by 5 mt (mainly because of a 8.5 mt increase in soyabean partly offset by 3.5 mt decline in sunseed and rapeseed), not all the seeds will be crushed. ``Crushers will not crush all the additional oilseeds, merely adding to meal stocks; oilseeds stocks will rise'', he observed.

Speaking on China's commitment under the WTO, Dr Fry pointed out that China had in effect liberalised oilseed import, as a result of which more and more of raw material for domestic crushing was flowing into the country. China recently issued an import quota of 2.4 mt for palm oil; but no purchases have been so far. Looking to China's import requirement, the expert forecast that palm oil import this year may touch 2 mt but will fall below the quota of 2.4 mt.

A presentation on supply, demand and price outlook for Indonesian palm oil talked about rapidly expanding output in the country. Output has been growing in the last four years at about one million tonne a year. From 5 mt in 1998, production expanded to 6 mt in the following year and then on to 7.1 mt in 2000 and to 8.1 mt last year. For 2002, the output forecast is a further increase to 8.8 mt.

Exports from Indonesia have also kept pace with production expansion. Indonesia's palm oil exports surged from 4.3 mt in 2000 to 5.2 mt in 2001. However, its share of Indian market remained unchanged at about 1.7 mt despite sharp duty hike by India.

Interestingly, the domestic refining capacity too has expanded from 7.4 mt in 1999 to 10 mt in 2001 making Indonesia one of the fastest growing vegetable oil economies of the world. The speaker Mr. Tan Siauw Liang forecast Indonesian crude palm oil prices to range between $ 300-350 a tonne, free-on-board, during 2002.

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