The Hindu Business Line : Palm oil seen range-bound

IN what could be termed as an unusual unanimity of views, almost all the speakers at the Palm Oil Price Outlook 2005 conference here said they expected crude palm oil prices to rule between Malaysia ringgit (MYR) 1,300 and 1,500 a tonne, with the average lying somewhere in-between.

Speaking on "India and the Price Outlook for World Vegoils in 2005", Mr Dorab Mistry, the London-based Director of Godrej International Ltd, said he expected crude palm oil market to be in the MYR 1,300-1,400 range during March-May, but more towards the upper-end of the price band.

From June, the market may move towards the lower end because of South American bean oil supplies; and in the third quarter, factors such as weather, palm oil production cycle and northern hemisphere crop progress would come into play, he added.

Given the fine balance between incremental demand and supply for 2005-06, there can be no bearishness, according to Mr Mistry.

"If there is any weather hiccup, prices would flare up" he asserted.

The speaker saw oilseed import in to India as a distinct possibility and estimated potential imports of about five lakh tonnes comprising high oil content seeds such as sunflowerseed and rapeseed.

Referring the active role of American multinationals in the Indian soya market, he rebuked Malaysia of neglecting investments in India.

If there is no problem on the production front, prices will be steady to friendly and not runaway; otherwise, there would be a rally, according to Mr Thomas Mielke, Editor of the well-known industry magazine Oil World published from Hamburg. He believes palm oil production could slowdown during April-September period this year, incidentally the peak output months for the commodity.

Mr Mielke saw Malaysian crude palm oil futures prices averaging MYR 1450 a tonne over the next 2-4 weeks and later to move into the MYR 1450-1550 range once palm oil production slowdown is confirmed.

Mr Mielke estimated 2004-05 world soyabean crop at 217.5 million tonnes (mt) versus 184.9 mt last year.

Although current estimate points to a crop size of 57 mt in Brazil (down from the initial target of 65 mt), continued dry weather can push the Brazilian soyabean crop down to 54 mt and Argentine crop to 36.5 mt (39 ml.t.), he pointed out.

Striking a slightly less optimistic note, Dr James Fry of the London-based consultancy, LMC International, said a small surplus of supplies over demand this year and high Indian tariffs on palm oil may in the short run depress crude palm oil prices towards MYR 1,200 a tonne; but a third quarter upward movement in the soya market will lift palm oil values close to MYR 1400, before the level falls away below MYR 1,200 in the last months of 2005.

Commenting on India's role in impacting prices, Dr Fry said with its large oil imports and ability to switch from palm to soft oils, India plays a crucial role in determining the structure of vegoil prices. Its import tariff advantage for soyaoil is almost exactly reflected in the EU soya oil premium over crude palm oil, he pointed out adding that recent hike in Indian customs duty will tend to penalise palm oil further.

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