Saturday October 4, 2003 (The Star) - THE price of palm oil is likely tobe firmer in the first quarter next year than in the current quarter onexpectations of continued tight supply and lower stocks of the world'smajor oils and fats.
Ista Mielke GmbH director Thomas Mielke said: With world palm oilproduction growth expected to slow down further at the start of the newseason October 2003 to September 2004 palm oil prices are expected toperform better than rival soya oil next year.
The price of crude palm oil (CPO) over the past two weeks has been bullishand is currently trading above the RM1,500 per tonne level.
In fact, the wide price discount of palm oil to soyoil would likely narrowto US$60 from US$100 currently, Mielke told the Palm Oil RefinersAssociation of Malaysia's annual forum in Kuala Lumpur yesterday.
World stocks of the major 17 oils and fats as of Oct 1 were only 12.6million tonnes, down 9% from a year earlier, and 15% from two years ago.
Mielke said world palm oil production next year, expected at 28.9 milliontonnes, was slightly higher than the 27.10 million tonnes forecast forthis year. Opening stocks next year is seen at 3.71 million tonnes,against 3.92 million this year.
However, he cautioned that both CPO and soya bean markets were currentlyvulnerable and due for some technical correction.
We may see some downward pressure on prices over the next one to threeweeks owing to expanding soya bean harvests and some technical selling dueto profit-taking after the recent bullish performance, Mielke said.
In addition, he said, world oilseeds crushing activities would alsoincrease seasonally over the next three months, which could also lead to aslight recovery in oils and fats stocks, thus creating temporary pressureon seed oil prices, including palm oil and soyoil.
Next week, I expect soya oil and palm oil prices to be vulnerable to atechnical setback, and to trade below their recent highs for most of thismonth, he said.
Mielke, however, expects a fast price recovery from next month onwards.
The new 2003/2004 season is set to be more challenging for both producersand consumers alike, with severe soya bean production losses in the US andprospective slowing growth in the world palm oil production by majorproducers, he said.
The recent price rallies were breathtaking and this could be a foretasteof what lies ahead for the next six months, Mielke said.
Ista Mielke publishes Oil World, an independent information provider forthe oilseeds, oils and oil meal trade and industry.