Palm oil producers including Indonesia and Malaysia may need to find new uses for the world’s most-consumed edible oil to absorb the biggest-ever supplies and reverse a slump in prices, according to Frost & Sullivan.
“Malaysia and Indonesia may need to find new applications from palm oil in order to take up the slack caused by increased CPO supply,” Chris de Lavigne, global vice president of consulting, told a conference in Kuala Lumpur today, according to a copy of his remarks, using initials for crude palm oil.
Palm, used in foods and biofuels, is mired in a bear market after global supplies and reserves expanded to the biggest ever. The oil may trade at a so-called heavy discount to soy oil, an alternative commodity, as Indonesia and Malaysia harvest bumper crops, de Lavigne told the Palm and Lauric Oils Conference & Exhibition. Prices dropped 23 percent last year.
The oversupply from increased plantings in Indonesia “will take time to alleviate,” de Lavigne said, according to the prepared remarks. “We could possibly see another mini slump in prices in 2013.”
Palm oil traded at 2,400 ringgit ($774) on the Malaysia Derivatives Exchange at the midday break, after dropping 26 percent over the past year. The discount to soy oil was at $332.87 a ton, from $109.67 a year earlier, according to data compiled by Bloomberg.
“Despite the huge spread versus soy, palm was struggling to generate more demand,” Harald Sauthoff, global vice president for procurement of natural oils at BASF Personal Care & Nutrition GmbH, said at the conference. “The recent spread suggests that all possible substitution has been executed.”
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