Palm oil, used in foods and fuels, may climb to a four-year high by end-June on “extremely tight” cooking-oil supplies, according to trader Dorab Mistry, who’s correctly forecast trends over the past year. Prices gained.
Futures may advance 24 percent to 4,000 ringgit ($1,321) per metric ton, from 3,232 ringgit at the end of the morning session, said London-based Mistry, director at Godrej International Ltd. Prices may then drop to $1,150 to $1,200 on a free-on-board basis, before extending their decline if the low- output cycle ends, Mistry told a conference in Kuala Lumpur.
Inventories of palm, soybean, rapeseed, sunflower and five other oils will decline to less than 30 days of consumption this year, the fewest since 1977, according to Bloomberg calculations based on U.S. Department of Agriculture data. Higher prices will help to boost global food costs, while increasing profits at producers including Sime Darby Bhd. (SIME) and PT Astra Agro Lestari.
“This promises to be a year of two halves,” said Mistry. “The first half, at least until June 2012, promises to be extremely tight and bullish. For the second half, we shall have to see how production performs.”
Mistry, who’s traded palm oil for more than three decades, has been predicting a rally to 4,000 ringgit this year since last April. Last year, he correctly forecast that the commodity would bottom at about 2,800 ringgit before rebounding, according to speeches in April, June and September.
“His views are well-respected,” said Chandran Sinnasamy, trading head at Kuala-Lumpur based LT International Futures (M) Sdn. “If you look at the participants’ interest in the speakers at the conference, Mistry is their top priority.”
Palm oil for delivery in May reversed losses to gain as much as 0.7 percent to 3,265 ringgit a ton on the Malaysia Derivatives Exchange, and was at 3,264 ringgit at 5:54 p.m. in Kuala Lumpur. The price reached at one-year low of 2,754 ringgit on Oct. 6, and then rallied as drought in South America cut soybean supplies. Futures last reached 4,000 ringgit in March 2008, closing above that price on only five days ever.
Michael Coleman, managing director at Aisling Analytics Pte, said last month palm oil may climb to $1,300 (3,936 ringgit) a ton by midyear. Prices may trade between 3,100 ringgit and 3,510 ringgit a ton this year, Ramli Abdullah, senior research officer at the Malaysian Palm Oil Board, told the conference today.
“As it turns out, 2011-12 is unique in that soybean production is down as against the previous year by a massive 20 million tonnes,” said Mistry.
Malaysian palm-oil production may be flat in 2012 between 18.6 million and 19 million tons, while output in the biggest grower Indonesia may reach 26.5 million tons, said Mistry, restating forecasts made in December. From March, production each month will be less on a year-on-year comparison, he said.
Output in Malaysia, the second-largest grower, may climb to 19.36 million tons in 2012 from last year’s record 18.9 million tons, according the nation’s palm-oil board. Indonesia’s harvest may rise to 25.7 million tons from 22.5 million tons last year, the agriculture ministry has forecast.
Prices may be lower in 2013 if the El Nino weather pattern fails to materialize, said Mistry. An El Nino is the periodic warming of the ocean surface off the western coast of South America that can reduce rainfall in parts of Asia, hurting crops.
Worldwide consumption of vegetable oils may expand 6 million tons in the 2011-2012 marketing year, outpacing supply, with food and biofuels demand growth each representing about 3 million tons, he said.
India’s vegetable-oil imports will gain 9.3 percent to 9.48 million tons in 2012-2013, with palm oil accounting for about 76 percent, Mistry said. Local output is expected to drop to 6.95 million tons from 7.15 million tons, he said. India is the largest palm-oil user.
Crude, degummed soybean oil may peak at between $1,250 a ton and $1,300 a ton free-on-board, while soybean oil in Chicago may climb to 60 cents a pound, he said. Soybean oil for delivery in May was at 53.60 cents on the Chicago Board of Trade today.
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