Palm oil prices will drop in December before resuming a rally from January to April next year, fuelled by the tight supplies, Thomas Mielke, executive director of Oil World, said today.
Prices may rise by as much as 300 ringgit a metric ton in the first four months of next year before dropping from May, Mielke said at a conference in Bali.
“For seasonal factors, we should see some setback in prices, but during January-April 2011, there is a risk of even higher prices, a renewed price rally,” Mielke said. Production is expected to be “sizably better” from May onwards, he said.
Palm oil futures for February delivery rose 0.5 percent to 3,516 ringgit ($1,118) a ton, the highest price in more than 28 months, on optimism that increasing demand in China may strain global supplies curbed by rain and drought in producing nations. China and India account for 2 million tons to 3 million tons of growth in vegetable-oils demand annually, and that will expand considerably in the future, Mielke said.
Palm oil production is going to have a “‘strong recovery” in 2011, and will expand by at least 3 million tons, after two straight years of declining yields.
Output in Indonesia will increase by as much as 2.1 million tons and Malaysia is expected to produce 700,000 tons more than this year, he said. Harvests in 2012 may be affected as planting slowed in 2009, he said.
Still, Indonesia must raise its palm-oil output by close to 2 million tons annually, which will require an increase in area of between 350,000 to 400,000 hectares per year, he said.
“The global market is dependent on rapid growth in Indonesian production,” Mielke said. “We need more investments and a higher planting rate in the next years than the planting we have seen in 2009 and 2010.”
Soybean oil production in South America may decline by 5 million tons to 129.7 million tons in 2011. Argentine soybean- oil prices are likely to rise above the November peak of $1,230 by early 2011.
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