SINGAPORE, Sept 10 (Reuters) - Malaysian crude palm oil
futures are likely to ease another 6.5 percent to around 2,200
ringgit per tonne as surging production and weak demand weigh on
the market, industry analyst Dorab Mistry said on Wednesday.
Palm oil output in Indonesia, the world's biggest producer,
is likely to jump to a record high of 20 million tonnes in 2008,
an increase of more than 16 percent from last year.
Malaysia's crude palm oil output is expected to reach 18
million tonnes, compared with 15.8 million tonnes in 2007, Mistry
told an industry conference in Singapore.
"The high cycle of palm production shows signs of continuing
well into October and even as far as November," Mistry said. "I
also believe that in the first half of November, the combined
stocks of Malaysia and Indonesia will exceed a tank bursting
figure of 5 million tonnes."
Mistry -- a director with India's commodities-to-appliances
company Godrej International -- said his forecast on palm oil
prices was based on crude oil at around $100 a barrel.
"My first price point for a market clearing level for CPO is
a price of $600-650 FOB Malaysia which would equate to BMD
futures at about 2,200 ringgit."
"I must caution that if Nymex WTI crude oil falls further, to
say $80 per barrel, that level of $600-$650 will need to fall
further."
On Tuesday, James Fry, another leading industry analyst, said
the price of Malaysian crude palm oil would hover around $700 per
tonne during the next six months and would find support around
2,300 ringgit because of biofuels demand.
The benchmark November crude palm oil contract on the Bursa
Malaysia Derivatives Exchange
4.66 percent, at 2,354 ringgit a tonne after trading as low as
2,346 ringgit a tonne, a level not seen since August 21, 2007.
It has fallen nearly 50 percent from its March peak of 4,486
ringgit due to concerns about a build-up of supplies and news of
defaults from buyers in India and China.
Mistry said a decline in palm oil prices could propel the
ailing biodiesel industry.
"Palm has within itself the means to increase its biofuel
market share so much that the surplus and the stocks can be
cleared out without difficulty," he said.
Mistry said surging prices had cut vegetable oil demand from
the food and the fuel sectors in the first half of this year.
"For the oil year 2007/08, we have lost 1 million tonnes of
food demand and about 500,000 tonnes of biodiesel demand as a
result of high prices."
(Reporting by Naveen Thukral; Editing by Sambit Mohanty)
((naveen.thukral@reuters.com; +65-6870-3851; Reuters messaging:
naveen.thukral.reuters.com@reuters.net))
Keywords: OILS MISTRY/
