KUALA LUMPUR: Crude palm oil prices are expected to drop around 19 percent from current levels to 2,200 ringgit ($534) per metric tons over the next two months as production recovers in the new oil year, a leading industry analyst, Dorab Mistry.
In the current oil year ending September, palm prices have gained 9 percent as dryness linked to an El Nino weather event curbed yields across top producers Indonesia and Malaysia. Benchmark futures hit a five-month high on Thursday and are now trading at 2,700 ringgit per metric tons.
While global palm oil output for 2015/16 is seen declining by significantly more than the previous forecast of 2.5 million metric tons, a strong recovery next year should offset the deficit.
“Overall in oil year 2015/16, palm oil production will decline by over 6 million tonnes, a decline which has never before been seen in history,” Mistry said at industry conference Globoil India. But production next oil and calendar year could see a strong recovery of almost 6.5 million metric tons, he added. “Let us not ignore the rapid expansion of palm oil production in Central and South America.”
However, for 2015/16, Mistry said he expects a sharper-than-estimated annual drop in output from Indonesia and Malaysia.
He forecast a 3.5-4 million metric tons decline in Indonesia’s output, versus a fall of 1.2 million metric tons projected before. For Malaysia, he pegged output at 17.83 million tonnes, versus his previous estimate of 18.44 million metric tons.
For the calendar year 2016, he sees Indonesia churning out 28.5 million metri tons of palm oil, lesser than a prior forecast of 31 million metric tons, and Malaysia producing 18.2 million metric tons.
In other vegetable oils, Mistry said he sees prices of soyoil, palm’s rival, falling to $650 per tonne on a free-on-board basis if palm declines to 2,200 ringgit, adding that lauric oil prices are also due for a correction.
