An­a­lyst bear­ish on palm oil prices

The Sun (Malaysia) - - SUNBIZ -

KUALA LUMPUR: Palm oil prices are ex­pected to drop 11% from cur­rent lev­els to a more than three-month low by the end of 2016, and ex­tend losses through June as pro­duc­tion and in­ven­to­ries re­cover from an El Nino weather event, a lead­ing in­dus­try an­a­lyst said.

Bench­mark palm oil fu­tures on the Bursa Malaysia De­riv­a­tives Ex­change have al­ready gained 14% this year with dry­ness linked to last year’s El Nino hurt­ing palm fruit bunches in top pro­duc­ers In­done­sia and Malaysia. Prices hit an al­most three-year high this week and are now at RM2,826 per tonne.

Palm oil fu­tures will drop to RM2,500 by the end of De­cem­ber, an­a­lyst Dorab Mistry said yes­ter­day at the China In­ter­na­tional Oils & Oilseeds Con­fer­ence in Guangzhou. That would be the low­est since early Septem­ber.

The mar­ket will sink fur­ther to RM2,200 by June next year, a level last seen in July 2016, due to “sus­tained pres­sure” as the im­pact of El Nino wears off, he added.

“I an­tic­i­pate a build-up of stocks in Malaysia as well as In­done­sia,” Mistry said.

In the oil year from Oct 2015 to Sept 2016, global palm oil pro­duc­tion de­clined by a record of over 6 mil­lion tonnes, but there will be a “strong re­cov­ery” next year, Mistry said.

He re­it­er­ated that world out­put would re­cover by nearly 6.5 mil­lion tonnes for the oil-year 2016/17 and cal­en­dar year 2017.

Mistry fore­cast Malaysian palm oil pro­duc­tion in the cur­rent cal­en­dar year at 17.5-17.7 mil­lion tonnes. That would be a drop of 11-12% from a year ago.

The an­a­lyst, how­ever, cau­tioned that his price pro­jec­tions did not take into ac­count the out­come of the US pres­i­den­tial elec­tions. If Repub­li­can Don­ald Trump wins, there will be a knee-jerk re­ac­tion from mar­kets and it can be at least one month before fun­da­men­tals re-as­sert them­selves, he said. – Reuters

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