Palm Oil to Climb at Least 20% on Limited Supply, Merchant’s Coleman Says
Palm oil is expected to rally to more than $1,300 per metric ton by the middle of the year as global vegetable-oils supplies tighten, according to Michael Coleman, managing director at Aisling Analytics Pte Ltd.
“Absent a demand shock, we think the palm oil price will perform very well over the coming months,” Coleman said at a conference in Singapore today. The target referred to the contract in Malaysian ringgit converted into dollars, he said.
Palm oil for May delivery on the Malaysia Derivatives Exchange was at 3,252 ringgit ($1,078) per ton at 4:20 p.m. in Kuala Lumpur, after gaining 2.4 percent this year. The price touched 3,294 ringgit yesterday, the highest level since June.
The midyear target is “driven by the demand outlook for the vegetable-oils complex, which is largely driven by what’s going to happen in soybeans,” Coleman said. “Even with a world economy that’s a little bit shaky, we’ve still got strong demand growth,” he said.
Soybean oil and palm oil are substitutes in food and fuel uses. Global soybean production may drop to 251.5 million tons this year from 264.2 million last year, according to the U.S. Department of Agriculture. Drought has cut harvests in South America, including in Argentina.
Coleman’s Merchant Commodity Fund, which he co-founded with Doug King, lost 30 percent last year after wrong-way wagers on sugar and vegetable oils. That snapped seven years of gains, and still left initial investors with a return of 236 percent. The fund was started in June 2004 with $10 million and assets were $550 million last month. Coleman became chief risk officer from January and most of the fund’s assets are now traded by King.
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