October 04 2003 - DECLINING stockpiles and possible poor production ofother edible oils in the coming months have pushed up palm oil prices,with market players expecting the uptrend to remain strong.
Some traders are projecting commodity prices to reach as high as RM1,600 atonne by year-end and remain firm in the first quarter of next year.
Yesterday, prices of crude palm oil (CPO) futures for December delivery onthe Malaysia Derivatives Exchange broke the psychological resistance levelof RM1,500 and settled at RM1,519 a tonne.
The CPO price gain is partly caused by rallying soyabean oil prices whichgained to 25.40 US cents a pound, its highest in three years, due tolower-than-expected soyabean harvest.
Soyabean oil yield in the US fell short to 2.6 billion bushels, a 7.1 percent drop from last year’s 2.8 billion.
When there is a soyabean oil shortage, its price rallies and other edibleoils will follow suit, palm oil included, the trader told Business Timesin Kuala Lumpur yesterday.
Bloomberg yesterday quoted Oil World as saying that CPO prices may rise inthe next six months because of an increase in demand from China and India,Malaysia’s top two buyers.
Oil World said India, the world’s largest importer of edible oil, mayboost imports this month and in November due to declining domesticstockpiles.
The Indian oil industry is currently facing a tight supply situation dueto a delay in the subcontinent’s soyabean harvest, Oil World said.
The Hamburg-based magazine also said that China may boost its imports ofpalm oil as the rise in soyabean prices is making palm oil relativelycheaper.
The Oil World forecast is in contrast with many predictions made byanalysts last month who had said the good times would end for Malaysia’splantation companies as palm oil prices are expected to soften beginningnext year.
Analysts said the plantation sector was not expected to perform asstrongly as other sectors in 2004 due to overproduction of the commoditycausing prices to soften as well as stiff competition from the world’sother 16 edible oils and fats.
Well, the analysts either forgot or did not bother to look at the otherside of the market. They can predict prices may tumble, but they forgotthat at the same time both India and China continue to buy huge amounts ofpalm oil, said a trader.
Another trader said the market should not be discounted too early becausemonth-to-month performance changes very rapidly and always bucks thetrend.
Everybody anticipated poor exports for both August and September toregister below one million tonnes. But this did not materialise as 1.2million tonnes were exported in August and one million tonnes inSeptember.
Exports are also expected to be above one million tonnnes this month.
The strong exports have balanced high production, estimated to hit anall-time high of 12.5 million tonnes this year compared with 11.9 milliontonnes last year.
The commodity’s stockpile will not rise sharply and is expected to hoverbetween 1.4 million tonnes and 1.5 million tonnes. I think prices willhold until the year-end, with support at RM1,550 and resistance atRM1,550,” the trader said.
An analyst said that apart from the positive Oil World report, the marketwas also pushed up by the recent heatwave in Europe which spread to the USand caused havoc with the soyabean harvest.
At the Kuala Lumpur Stock Exchange yesterday, plantation stocks closedmixed.
IOI Corp Bhd eased 10 sen to RM6.40 with 875,100 shares worth RM5.6million traded. Likewise, PPB Oil Palms Bhd closed 1 sen lower at RM2.94with 262,200 shares worth RM770,124 changing hands.
Golden Hope Plantations Bhd, however, gained 2 sen to close at RM3.38 with149,900 shares worth RM506,726 traded, while Kuala Lumpur Kepong Bhdstrengthened 5 sen to RM6.20 with 52,600 shares worth RM325,560 changinghands.