The Hindu Business Line : Industry, trade upbeat on palm oil price outlook

Kuala Lumpur, Feb 25 A day ahead of the much-awaited annual Palm Oil Price Outlook organised by Bursa Malaysia, the mood within the vegetable oil industry and trade, especially among producers and exporters, is absolutely upbeat. And why not?

The market has gone through an unprecedented period of bullrun that has taken prices to four digits in dollar terms, a stark contrast with the long bear run of 2001-2002.

Driving factors

Currently both crude palm oil and soyabean oil are trading well above the psychological $1,000 a tonne, nearly five times higher than prices 5-6 years ago; and twice the rates traded in 2006.

What changed in the recent years?

An unusual combination of factors — robust surge in demand, supply uncertainties and fund play — are currently seen driving the commodities market in general, and vegetable oil market, in particular, up.

Asset class

Importantly, commodities are now an asset class in the league of stocks, bonds, foreign exchange and real estate.Last one year, some commodities such as gold have outperformed other traditional asset classes.

Obviously, there is a larger flow of funds for trading commodities; and when the market fundamentals face uncertainties or imbalances – such as the one vegetable oil market is currently facing – can funds lag behind?

Trading volumes

Trading volumes in the futures counters have grown rapidly. Whether Bursa Malaysia for crude palm oil or Chicago Board of Trade for soyabean oil, trade transactions are exploding.

The interest in vegetable oils is heightened by other factors such as the crude market, ocean freight rates and exchange rate.

Will crude palm oil reach ringgit 4,000 a tonne or is there a possibility of correction down to around ringgit 3,000? Bursa Malaysia has lined up several expert speakers from around the world to present their perceptive analysis of the current global vegetable oil market dynamics and expectations of the shape of things to come.

Analysis meet

The keynote speech will be delivered by the Guest-of-honour, Dr Peter Chin Fah Kui, Malaysia’s Minister for Plantation Industries and Commodities.

Dr James Fry of LMC International will speak on the lessons we can learn from the past bull markets and Mr Thomas Mielke, Hamburg-based editor of Oil World, will share his thoughts on the reactions of the world vegetable oil market to challenges from the energy market.

Mr Dorab Mistry, Director of the London-based Godrej International, will present a paper on palm oil price outlook with special reference to India. There will also be experts speakers on palm oil producers’ perspectives and soya oil complex outlook.

A special session on biodiesel too has been organised. About 1,700 participants are expected to turn up for the event.