Palm oil prices expected to pick up in short term
SINGAPORE/NUSA DUA: Lower output of palm oil into early next year and tight supplies of rival soyabean oil are likely to bolster prices for the tropical product in the short term after they hit a four-year high this week.
Higher mandates for biodiesel output in the United States and Indonesia would squeeze inventories of palm oil, used in products ranging from candy to cosmetics and cooking oil.
“The view is that production should recover from El Nino back to last year’s numbers, but big gains could be more towards the second half of next year as there are still the lagging secondary El Nino effects,” said CIMB Investment Bank regional head of plantations research Ivy Ng.
The benchmark Malaysian palm oil contract this week touched its highest since 2012.
Palm oil production in Indonesia and Malaysia, which account for 80 per cent of global supplies, was forecast to fall by nearly five per cent to 58.8 million tonnes this year from a year ago, following dryness caused by El Nino earlier this year, according to the US Department of Agriculture data.
Indonesia’s production and exports of palm oil are expected to fall between 10 and 15 per cent this year, said Indonesian Palm Oil Association executive director Fadhil Hasan on Thursday.
At the same time, the country’s demand for crude palm oil for use in biodiesel was expected to grow 68 per cent to 10.6 million tonnes by 2020 from 6.3 million tonnes forecast for this year. Reuters Ivy Ng
Regional head of plantations research
CIMB Investment Bank