The Hindu Business Line : Soya to keep vegoil price under leash — Malaysian output weakness to boost crude palm oil

Crude palm oil prices will be boosted by weakness of Malaysian output, but in the global oil market strong US soyabean output will keep the average level of vegetable oil prices in check, according to Dr James Fry of London-based consultancy, LMC International. He was speaking at the annual Palm Oil Price Outlook 2006-07.

The pivotal role of India as a large importer, able to switch from palm to soft oils, affects world markets via its preferential tariffs for soyabean oil.

Indian tariff impact

However, non-Indian customers of palm oil are starting to lessen the impact of India's tariff policy on world prices, he added.

China is set to increase its demand for oil by over 1.5 million tonnes in 2006, but the demand for meal is so strong that over half the growth in oil requirement will be met by oil derived as a co-product from crushing imported soyabean.

There are adequate supplies of potential oil and meal, contained in oilseed stocks this year. 2005-06 will see little change in actual oil stocks.

Energy uses of vegetable oils are now a major element of European Union (EU) demand, causing rapeseed oil prices to stand at over double their long-term trend value.

All other EU oil prices are above their long run trends, but to a lesser extent. For instance, CPO stands only 16 per cent above its long run trend value, Dr Fry said.

According to him, Malaysian palm oil prices will fluctuate between 1,375 and 1,500 Malaysian ringgits (MYR) a tonne until September, but these projections are sensitive to stock totals.

However, if next year's northern hemisphere oilseeds harvests record only average yields, CPO prices should test MYR 1,600 by December.

Oleochemicals market

On the oleochemicals market, huge capacity installation for fatty alcohol production in the next two years will have a profound effect on the market, an expert from the industry said.

While the market size is two million tonnes and current production capacity is 1.8 mt, about 900,000 tonnes are expected to be added by 2007, of which already two plants representing 100,000 tonnes have gone into production, he said.

VVF Ltd recently set up a 40,000 tonnes plant, while another one went on stream in Malaysia.

The oleochemicals industry is facing four-cornered attack including over-capacity, biodiesel, disposal of glycerine, and vegetable oil market fluctuations. Dr Fry has forecast CPO price of MYR 1,550 a tonne for the year.