Tuesday, September 28, 2010

Malaysia, Indonesia Palm Oil Output To Expand By 2.5M Tons In 2010-11 - Analyst

Palm oil production growth in Malaysia and Indonesia, the world's top producers of the commodity, may expand by 2.5 million metric tons during the calendar year 2010-2011, as widespread rain will boost palm yields and as the lower palm production period ends, vegetable oils analyst Dorab Mistry said.

"The biological low cycle will come to an end around June 2011 and the higher cycle should coincide with the beneficial after-effects of good rainfall in 2010," Mistry, director at Godrej International Ltd., said in a speech prepared for an industry conference in Mumbai, India.

Mistry reiterated his forecast for Malaysian crude palm oil output this year, saying that an El Nino-related dry spell late last year will likely cut production by 2.3% to around 17.2 million tons, as the two-month dry spell caused tree stress and lowered crop yields.

He estimated Indonesia's palm oil production in 2010 to reach 22.5 million from 22 million tons last year.

Mistry said palm prices are likely to trade lower the next four to six weeks, as he predicted a strong recovery in CPO production, which "will spillover into November. Malaysia's month-end stocks will rise and prices will need to go lower."

Malaysia's September CPO output is likely to grow at a slower pace, as harvesting was disrupted when workers headed home for the Eid ul-Fitr celebrations earlier this month, traders said.

"We could lose about MYR150-MYR200...After that weak spell, prices should begin to recover as exports remain strong," Mistry said, as major vegetable oil buyers India and China restock supplies, tipping prices to rally to MYR3,000-MYR3,200/ton by January next year.

He also said global soyoil production for 2010-2011 period is projected to increase by about 2.1 million tons, Mistry said, citing higher rate of crushing and ample supply of global soybeans.

Rival soyoil prices will likely rise to rise sharply, to $1,050 a ton free-on-board Argentina ports by January, he said, widening the gap between soy oil and palm oil, making the latter a cheaper alternative to price-sensitive buyers.

CPO usually trades a wide discount to soyoil, but a record crop of soybeans from South America this year and a likely record harvest from the U.S. even as palm production slowed, has pushed it into a narrow discount around $10-$20/ton the last few months.

Dow Jones Newswires

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