Palm oil may climb to 4,000 ringgit ($1,277) by the end of the first half, the highest since 2008, as output slows in Indonesia and Malaysia amid “buoyant” demand, said Dorab Mistry, director of Godrej International Ltd. Futures in Malaysia may advance to 3,300 ringgit a metric ton in January and “gradually” increase to 4,000 ringgit, Mistry said, keeping a forecast made in July. January-delivery futures closed at 3,135 ringgit a ton on Nov. 11 taking this year’s decline to 17 percent, snapping a two-year gain. Rising prices may lift world food costs that the United Nations predicts will stay at historically high levels this year, increasing pressure on central banks to raise interest rates. Commodities fell to a 10-month low on Oct. 4 on concern that the deepening European debt crisis may slow global economic growth and curb demand for raw materials.
“With growth in crude palm oil production decelerating and demand remaining buoyant, prices must rise,” said Mistry, who in September correctly predicted the tropical oil would drop to 2,800 ringgit last month. Demand for vegetable oils is expected to grow by 6 million tons in the 2011-2012 marketing year, outpacing global supply, Mistry said yesterday at the China International Oils and Oilseeds conference in Guangzhou. Mistry cut his estimates for this year’s palm oil production for Malaysia to 18.8 million tons from 19 million tons and Indonesia’s output to 25.2 million tons from 25.5 million tons.
Slower Harvesting
Global output growth for 2011 may be 5.5 million tons from an earlier forecast of 6 million tons, he said. Production may increase by about 2 million tons in 2012, he said. “In the last few weeks, the pace of increase has been decelerating, particularly in the case of older tall trees,” he said. “Add to that, the weather in Malaysia and in Indonesia has turned far too wet and this leads to flooding, slower harvesting and other related problems.” Production typically peaks from July to October and tapers off during the rainy season from November onwards. La Nina, a cooling of the Pacific Ocean, can increase rainfall in Malaysia and Indonesia and cause drier weather in Latin America and southern U.S. Forecast models suggest the La Nina event is likely to peak towards the end of 2011, and persist into early 2012, Australia’s Bureau of Meteorology said Nov. 9.
Stockpile Drawdown
“From November this year, we shall see a drawdown in palm oil stocks,” Mistry said. “It will become a function of price and of spreads to keep stocks in the second half of 2012 at a workable level and to prevent them from falling to a dangerously low level. As stocks decline, the new export tax structure in Indonesia will magnify those changes and create a disproportionate bullish effect on prices.” Indonesia, the largest palm grower, cut the maximum tax on refined, bleached and deodorized palm olein to 13 percent, from 25 percent, while crude palm oil will be taxed at a maximum of 22.5 percent from 25 percent earlier. The tax took effect Oct. 1. China, the world’s biggest user of cooking oils, may import larger amounts of oilseeds, vegetable oils and grains, helped by the stronger yuan, to replenish state reserves, he said.
“China will soon become the world’s largest importer of food,” he said. “Our oilseed complex is important to China and China is even more critical to price behavior with each passing year. I expect some recovery in soybean imports and crushing in China in 2012.”
Biodiesel
U.S. biodiesel production is expected to pick up “strongly” in the second half of 2012 and Brazil and Argentina, the biggest soybean exporters after the U.S., may increase their biodiesel mandates next year, which will be positive for soybean oil prices, Mistry said. Soybean oil futures in Chicago may trade between 65 and 70 cents a pound by June 2012, he said. December-delivery soybean oil was at 50.98 cents on Nov. 11. Sunflower oil will stay at parity with soybean oil for most of this time and then move to a small premium, while rapeseed oil in Europe will remain as a premium oil, according to Mistry. The strength in rapeseed oil prices was supported by the strong demand for biodiesel in Europe and the limited supply due to lower crops in 2011, a 2 percent biodiesel mandate in Canada, strong exports to the U.S., and the lower rapeseed crop in China. “The threat of contagion can scuttle this bullish forecast,” Mistry said.
“If equities tank, for any reason, then all commodity prices will also fall and will take vegetable oil, oilseeds and meal down as well.”
Soybeans (Source: CME)
US soybean futures finished higher, recovering from losses in recent sessions on technical buying and optimistic outlooks for a pickup in demand. After recent declines, traders viewed the market as oversold, particularly with speculation surfacing that China was shopping for US and South American soybeans following recent dip in prices, analysts say. Otherwise, futures drew support from more positive sentiment for the global economy amid a more stable outlook for the euro-zone debt crisis. CBOT Jan soybeans ended up 8c at $11.75 1/2/bushel.
Soybean Meal/Oil (Source: CME)
Soy product futures closed up, rallies in unison with higher soybean prices. End-of-week position evening following recent declines added support to underpin prices, analysts said. CBOT Dec soymeal end up $1.60 at $299.50/short ton; Dec soyoil rose 0.46c to 50.98c/lb.
Soybeans Rise on Bets U.S. Crop Will Shrink; Corn Drops on Shfit to Wheat (Source: Bloomberg)
Soybeans rose on speculation that the U.S. harvest declined more than the government estimated after dry weather during the summer lowered yields. Corn fell as producers of livestock feed shifted to cheaper wheat. The U.S. Department of Agriculture cut its forecast on this year’s soybean crop for a second straight month on Nov. 9, saying production will fall 8.5 percent to 82.9 million metric tons. Some fields from Minnesota to Tennessee were the driest ever in August, data from National Climatic Center show. “The soybean crop may get smaller,” Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana, said in a telephone interview. “There is some demand surfacing after the recent drop in prices.” Soybean futures for January delivery rose 0.7 percent to close at $11.755 a bushel at 1:15 p.m. on the Chicago Board of Trade. Yesterday, the price touched $11.67, the lowest for a most-active contract since Oct. 10. The oilseed, down 3.7 percent this week, has dropped 16 percent this year.
Soybean Prices May Extend Drop on Higher Output, Slower Demand From China (Source: Bloomberg)
Soybean prices may be poised to extend declines as supply increases from South America and demand growth may slow from China, the largest consumer. Soybeans have “room to fall” below $11.50 a bushel in the long term, said James Zhou, director of trading, Cargill Investment (China) Ltd. Prices are still relatively high, enough to sustain planting interest, so output may increase, Zhou said yesterday at a conference in Guangzhou, China. Soybeans traded at $11.755 on Nov. 11. Prices in Chicago have dropped 16 percent this year on larger crops in Brazil and Argentina, the biggest producers after the U.S., and concern the European debt crisis may curb global economic growth. Soybean imports may drop this year for the first time since 2004, the China National Grain & Oils Information Center said Nov. 11. Goldman Sachs Group Inc. last week reduced its forecast for soybeans on rising supplies.
Palm dips from 3-mth top; strong demand to buoy prices
SINGAPORE, Nov 11 (Reuters) - Malaysian palm oil futures were steady, after climbing to a three-month top in the previous session as the market was supported by a strong demand and a surprise drawdown in stocks.
"The market is down a bit because of weaker U.S. soyoil prices overnight but it's holding on," said one Kuala Lumpur-based trader. "We are entering the lean production months and demand is continuing to remain strong month after month."
Argentine rains could prompt soy area expansion
BUENOS AIRES, Nov 10 (Reuters) - Major world soy supplier Argentina got heavy rains over the last week that could set the stage for a larger-than-expected area to be planted this season, the Buenos Aires Grains Exchange said on Thursday.
The exchange did not boost its soy area estimate but said it might if good weather encourages farmers to devote more land to the crop.
India Oct palm oil imports to fall on month
NEW DELHI, Nov 11 (Reuters) - India's palm oil imports are likely to have fallen in October as they became more expensive after Indonesia tweaked export taxes to promote sales of its refined oil, a Reuters survey showed on Friday.
Palm oil imports could have dropped 12.2 percent in October to 614,375 tonnes from September, the average of forecasts in a survey of eight traders showed, while soyoil imports are likely to have risen 43 percent to 172,250 tonnes.
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