Palm futures may rise to 2,700 ringgit/ton by June, Mistry says

Godrej International Ltd.’s Dorab Mistry is turning slightly bullish on palm oil.

Benchmark palm oil futures may gradually rise to 2,700 ringgit ($690) a ton by June, the highest level since last November, Mistry said at an industry conference in Kuala Lumpur on Tuesday. He trimmed his production estimates for top growers Indonesia and Malaysia by 500,000 metric tons each to 37.5 million tons and 20.5 million tons respectively. Crude palm oil prices in Rotterdam may rise to $750 a ton, he said

Palm oil climbed 2.7 percent in February to close the month at 2,559 ringgit a ton as a drought in Argentina sent soybean prices surging. However, palm prices have fallen about 4 percent this month after top buyer India increased import duties, triggering concerns of a reduction in appetite for the oil used in everything from cooking oil to shampoo. In January Mistry saw palm trading in a range of 2,500 ringgit and 2,700 ringgit until August.

In an alternative bullish scenario, oil palms could suffer tree stress as haze returns to Southeast Asia this year, leaving Malaysian output unchanged in 2018 and Indonesian production up by just 2 million tons, Mistry said. Consumption of an extra 1 million tons of palm-biodiesel in Indonesia could be a game changer, he added.

In that scenario, combined stockpiles in the two countries could be well below 4.5 million tons, or even nearer to 4 million tons, by July, Mistry said. Although such “fireworks” aren’t expected, Rotterdam prices of crude palm oil may reach $800 a ton, he said.

High import duties on palm oil in India is a temporary solution, Mistry said, adding it would be better to cut taxes on crude palm oil to 34 percent. That would widen its spread to refined, bleached and deodorized olein and lead to a big increase in refining activity. Still, inflation may soon be a problem for India and the import taxes may fall by May, he said.

In other forecasts:

* Malaysia’s export tax on crude palm oil expected to return after the country’s elections

* Indonesia’s biodiesel fund is in surplus as the palm oil-gas oil spread has narrowedIt will be bullish for palm oil prices if subsidies are extended to non-public service obligatory sectors, beginning with 60,000 tons a month

* Rapeseed oil production in EU and Canada may rise by 2 million tons, India’s rape-mustard crop may drop to not more than 5.5 million tons from 6.7 million tons

* There are hardly any China state reserves of rapeseed oil left to be releasedThere’s massive crushing of soybeans in China but all soy oil is consumed internally Brazil to increase biodiesel mandate to B10 from March and will export very little soy oil

* Argentina FOB soyoil prices may rise to $770-$790 a ton India seen importing 3.1 million tons of soyoil in the oil year starting October 2017, compared with January estimate of 3.2 million tons

* Palm oil imports seen at 9.95 million tons vs 9.85 million tons estimated earlier Global 2017-18 edible oil supply seen rising by 6.5 million tons, total demand may rise by 6 million tons compared to earlier estimates of 7.5 million tons and 7 million tons, respectively

* Crude palm kernel oil prices in Rotterdam may face pressure after Ramadan, but won’t fall below $900 a tonUnder Mistry’s bullish scenario, prices will not likely drop below $1,000 a ton

* Forecasts based on assumptions of Brent crude at $60-$75/bbl; Federal Reserve to raise interest rates three times this year; US dollar to trade sideways or weaker amid stable currencies in emerging markets; strong worldwide growth below 5 percent.

Turning Points 2018
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