Godrej sees palm futures rising to 2,700 ringgit by June

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

Benchmark palm oil futures may gradually rise to 2,700 ringgit ($690) a tonne by June, the highest level since 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 tonnes each to 37.5 million tonnes and 20.5 million tonnes, respectively. Crude palm oil prices in Rotterdam may rise to $750 a tonne, he said

Palm oil climbed 2.7 per cent in February to close the month at 2,559 ringgit a tonne as a drought in Argentina sent soybean prices surging.

However, palm prices have fallen about four per cent 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 tonnes, Mistry said. Consumption of an extra 1 million tonnes 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 tonnes, or even nearer to 4 million tonnes, 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.