07.11.2019 (The Edge Markets MY) - GUANGZHOU/SHANGHAI (Nov 7): Total palm oil production in Indonesia and Malaysia is expected be flat next year, due to dry weather and low fertiliser application in the world's top two producers of the vegetable oil, according to industry analyst Dorab Mistry.
Indonesian output is forecast to rise by just 1 million tonnes to 44 million tonnes next year, while production in Malaysia is seen down by the same amount to 19.3 million tonnes, Mistry said, according to a copy of his presentation at an industry conference in Guangzhou, China which is seen by Reuters.
"Low or no fertiliser application in the first half of 2019 plus dry weather... and the lower planting of new areas will combine to give us production growth of just 1 million tonnes," he said, referring to output in Indonesia.
Starting from March 2020, world stocks of vegetable oils are likely to deplete, making the price outlook bullish, said Mistry, director of Indian consumer goods company Godrej International Ltd.
He expects benchmark prices would exceed 2,700 ringgit (US$651.70) a tonne by March next year due to lower output, higher demand from key markets like China and India, and a push to use more palm oil in biofuels by Malaysia and Indonesia.
Mistry estimates Indonesia's target to use biodiesel with 30% bio-content, known as B30, by January 2020 is likely to require an additional 2.5 million tonnes of crude palm oil.
China's soybean crushing activity and imports of rapeseed and rapeseed oil are expected to fall, leaving palm oil with "a big opportunity".
"China has turned out to be a star for palm oil in 2019 and will continue to be so in 2020. After this winter, in 2020, China may not import palm biodiesel due to uncompetitive pricing," forecasted Mistry.
"However, palm imports will expand due to edible and industrial demand. Palm and sunflower oil will replace soyoil (in China)."
China is expanding as a sun oil market, as bumper sunseed crops are set to make sun oil prices competitive this year.
Meanwhile, India, the world's top edible oil consumer, is set to import 16.3 million tonnes of edible oils for the 2019/2020 marketing year that started on Nov 1, compared with shipments of 15.6 million tonnes in the previous year.
Of this, palm imports would be 9.9 million tonnes, slightly up from 9.5 million tonnes in the prior year, Mistry forecasts.
(US$1 = 4.1430 ringgit)