PUTRAJAYA, Aug 26 (Bernama) -- Palm oil prices could narrow down toRM1,100 next month and stabilise to around RM1,200 per tonne followingthat, says a London based economist.
Presenting his paper on "Price Outlook for Vegetable Oils and for Palm Oilin Particular, at the International Palm Oil Congress (PIPOC) 2003 here onTuesday, Dr James Fry, managing director of LMC International, said therewould be a drop between 10 and 15 percent from the current Crude Palm Oilprice of RM1,300 per tonne.
He cited surplus in the supply of vegetable oils and in oils inunprocessed seeds as the major factors contributing to the drop in pricetrend.
"Although consumption is set to grow quite strongly, it will not increaseas fast as output, especially with the revival in the output of rapeseed,"he said.
The swing from a production decline of a million tonnes in the worldrapeseed oil production in 2002/03 to production growth of roughly amillion tonnes, despite another poor European Union crop, has been enoughto pull the yearly increase in the compined output of the four vegetableoils namely sunflower, rape seed, soybean and palm oil, he said.
"This turnaround in rapeseed has been strong enough to offset a smalldecline in the growth in soybean oil output and a slowdown of nearly amillion tonnes in the projected increase in palm oil production," he said.
There is, however, no doubt that consumption is expected to pick upsignificantly, with growth expected to go up from two million tonnes in2002/03 to 3.4 million tonnes in 2003/04, he added.
Fry said that the easing off of the Severe Acute Respiratory Syndrome(SARS) would also allow Eastern Asian demand to move ahead and regain lostgrounds this year.
In addition, a better monsoon in India, even though it began late, shouldlead to a recovery in the Indian market consumption, he said.
"Consumption will increase impressively, by almost 4.5 percent in 2003/04,but this will be overshadowed by growth of close to 5.5 percent in thetotal output of the four main vegetable oils, thereby reinforcing theaccumulated global supply surplus," said Fry.
He also cited India's demand, being the largest vegetable oil importer, asa factor that determined palm oil prices.
Fry said that soya oil had a tariff advantage against palm oil in India,which will enable the buyers to switch according to their needs and price.
Under the World Trade Organization bound, India imposes a 45 percenttariff on soya oil and 65 percent and 70 percent on crude palm oil (CPO)and refined, bleached and deodorized (RBD) respectively.
"The tariff advantage in favour of soya oil means that Indian refiners canafford to pay close to 20 percent more for landed soybean oil than forimported CPO," he said.
Meanwhile, not all participants of PIPOC 2003 agreed with Fry's projectionfor palm oil prices. Datin Dr B.E Liana Low from Bell Group Companiesdisagreed with the price forecast and questioned the India factor in theprice projection process.
She said that palm oil to a certain extent served different purposescompared with the other three vegetable oils, adding that palm oil wouldalways have its market forward.
She said that the palm oil market had expanded so much to countries likeEurope and Middle East due to the "halal" factor besides China, anothermajor importer of edible oil, and India.
Since March, even though Malaysia have had CPO stocks of about one milliontonnes, it is yet to fulfill the shipment needs.
"So, the demand is there (new markets), these are the valuable informationthat the market should capitalise on and boost up the price," she said.
Currently, CPO prices are being pressured due to various speculations thatIndia has enough stocks for Deepavali and China will not import a lot ofpalm oil due to the winter season, she told Bernama.
"India will still buy significant amount of oil for Deepavali and forChina, it will not stop buying because now lots of shipping companyprovide heating facility from shipping right up to the bulk installationand to buyers."
Besides that, Low said China had also lately banned eight companies whichexport soyabean to the country. This portion will be replaced with palmoil, she said.
Another factor that could keep CPO prices up is the upcoming Ramadanmonth, she said. "Harvesting will slow down during this month, so thesupply of CPO will be tighter."
As such, the total export figure for August and September would be aboveone million tonnes, she said, adding that the price could rise betweenRM1,400 and RM1,450 per tonne towards end of the year and beyond.
"Even if it falls, it will not be so much," she said.