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Friday, September 23, 2016

Palm prices to drop 19% by November as output recovers, says Mistry

Friday, 23 September 2016 | MYT 3:49 PM
Palm prices to drop 19% by November as output recovers, says Mistry

Dorab Mistry sees fall in crude palm oil prices

KUALA LUMPUR: Crude palm oil prices are expected to drop around 19% from current levels to RM2,200 (US$534) per tonne over the next two months as production recovers in the new oil year, a leading industry analyst, Dorab Mistry, said on Friday.

In the current oil year ending September, palm prices have gained 9% 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 RM2,700 per tonne.

While global palm oil output for 2015/16 is seen declining by significantly more than the previous forecast of 2.5 million tonnes, 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 tonnes, 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 tonne decline in Indonesia's output, versus a fall of 1.2 million tonnes projected before.

For Malaysia, he pegged output at 17.83 million tonnes, versus his previous estimate of 18.44 million tonnes.

For the calendar year 2016, he sees Indonesia churning out 28.5 million tonnes of palm oil, lesser than a prior forecast of 31 million tonnes, and Malaysia producing 18.2 million tonnes.

In other vegetable oils, Mistry said he sees prices of soyoil, palm's rival, falling to US$650 per tonne on a free-on-board basis if palm declines to RM2,200, adding that lauric oil prices are also due for a correction. - Reuters

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