Malaysia palm oil prices may fall 17% by De­cem­ber

The Star Malaysia - StarBiz - - News -

MUM­BAI: Bench­mark Malaysian prices for crude palm oil are likely to fall nearly 17% from cur­rent lev­els by Novem­ber or De­cem­ber as over­seas ap­petite for the com­mod­ity fal­ters over the win­ter, lead­ing in­dus­try an­a­lyst James Fry said.

Malaysian crude palm oil (CPO) fu­tures would drop be­low RM2,400 (US$572) per tonne in the last two months of the year, with their dis­count to other ed­i­ble oils like sun­flower and soy­oil widen­ing, Fry told the Globoil In­dia con­fer­ence.

Prices for the com­mod­ity, used to churn out prod­ucts rang­ing from soap to bio­fuel, stood around RM2,880 on Thurs­day.

They have jumped nearly a fifth in the past three months.

In­done­sia and Malaysia ac­count for nearly 90% of global palm oil pro­duc­tion.

Places such as China and Europe nor­mally re­duce their in­take of palm oil in win­ter months as the trop­i­cal prod­uct so­lid­i­fies in cold tem­per­a­tures.

Euro­pean Union CPO prices would likely drop by al­most US$100 from their Au­gust av­er­age of US$674 per tonne by Novem­ber-De­cem­ber, added Fry, the chair­man of com­modi­ties con­sul­tancy LMC In­ter­na­tional.

A re­cent rally in palm fu­tures based on re­ports of sharp fall in CPO out­put in Malaysia is “ir­ra­tional” as the re­duc­tion in pro­duc­tion due to na­tional hol­i­days would be made up later, said Fry.

“CPO out­put is re­cov­er­ing from the dev­as­tat­ing im­pact of the El Nino drought,” he said. An El Nino weather pat­tern hit South-East Asian palm pro­duc­tion hard in 2015, bring­ing drought con­di­tions to parts of the re­gion.

Sun­flower oil would re­main the most price-com­pet­i­tive al­ter­na­tive to palm oil in the Euro­pean Union mar­ket over the next six months, Fry said.

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