Projections of a sharp fall in palm oil inventory in Indonesia and lower production in Malaysia may push up palm oil prices in May.

Presenting a paper on ‘Global Scenario on Supply, Demand and Price Outlook for Vegetable Oils – 2013,’ on Friday, Dorab Mistry, Director, Godrej International, said CPO (crude palm oil) yields have begun to decline sharply which means the low cycle is projected to be somewhat more severe than anticipated.

This means production in the first half of 2013 will be lower than expected and Malaysian stocks will be drawn down significantly.

“I am projecting that Malaysian stocks dip below two million tonnes in June. Indonesian stocks will also be drawn down below four million tonnes,” he said.

Besides, the month of Ramzan commences in the second week of July which means peak Ramzan shipments will take place in the second half of June and first half of July.

Under the latest development, Mistry estimates palm oil futures to trade at 2,400-2,700 ringgit a tonne on the Bursa Malaysia Derivatives Exchange.

He had predicted a range of 2,300-2,500 ringgit through April at a meeting in Kuala Lumpur on March 6.

A bear market is set to deepen after August as futures drop below 2,000 ringgit, he said.

In March, he estimated Malaysian CPO production this year to be at 19.5-19.7 million tonnes and Indonesian production at about 30.5 mt.

He also estimated that large tracts of palm plantations in Thailand, Central America, Colombia and Africa would come into maturity during 2013.

As a result, total palm oil production in 2013 would grow by about 3.9 mt.

The latest development does not warrant any change in production estimates for 2013, he said.

> suresh.iyengar@thehindu.co.in

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