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Friday, September 13, 2013

CPO price may face downward pressure


KUALA LUMPUR: Palm oil may extend a decline as supply of the most used cooking oil from Indonesia and Malaysia climbs and biodiesel demand peaks, said Dorab Mistry, director at Godrej International Ltd, signalling a third year of losses.
A rally in futures since the end of July was over and prices would drop from now, Mistry said in remarks prepared for a conference in Singapore yesterday, without giving a forecast.
Prices rebounded 9.5% from a three-year low of RM2,137 a tonne in July as the spread between palm and gas oil created demand for biodiesel, he said.
Mistry predicted in May a drop to RM2,000 from July, citing a build-up in stockpiles during the peak-production cycle.
Futures have lost 4% this year, extending the combined 36% slump in 2011 and 2012, and a third year of losses would be the worst run since at least 1996, according to data compiled by Bloomberg.
Prices of the oil used in everything from candy to detergents posted the biggest monthly gain since December 2010 in August as crude oil rallied to a two-year high and a weaker ringgit boosted exports.
“I believe the rally in CPO (crude palm oil) prices has just about run its course and will face downward pressure from here,” said Mistry, who has traded vegetable oils for more than three decades.
“It would not surprise me to see new lows in vegetable oil and particularly in palm and lauric oil in early January.”
Palm for delivery in November ended the morning session at RM2,340 on Bursa Malaysia Derivatives yesterday. The Standard & Poor’s GSCI gauge of 24 commodities jumped to a six-month high on Aug 28, led by a rally in crude oil, soybeans, cocoa and cotton.
“Markets look like they have peaked and that the path of least resistance will be sideways to lower,” Mistry said. “This applies to grains, oilseeds, meal as well as vegetable oils. I am flagging some uncertainties with regard to demand for edible vegetable oils in countries like India which have suffered from currency degradation.”
The weakness in currencies of emerging-market economies would act as an import tax and would be disruptive for commodities demand, Mistry said.
Barring any weather disruptions, palm oil was set to trade lower on a bleaker economic outlook as the US Federal Reserve might taper stimulus, he said. —Bloomberg

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