Palm Oil Prices To Increase On Lower Supply

Commodity expert D .Mistry  predicts  difficult months for  Palm Oil  buyers .Palm Kernel Oil  is widely  used in bakery industry as  a low cost  substitute  for  vegetable oil  in Indian bakeries .


A  report
Supply worries, stoked by floods in major growing areas, may keep crude palm oil (CPO) prices high through the rest of the season this year, said Dorab Mistry, director of Godrej International, a respected name in the sector.

 Speaking at a conference in China on Sunday, he had forecast the key vegetable oil to surpass 3,300 ringgit per tonne in the next few weeks. The commodity, however, breached this benchmark earlier than Mistry’s expectations, to record a jump of more than four per cent early Monday on the Bursa Malaysia derivatives exchange.

Crude palm oil for delivery in January 2011 recorded a rise of 2.6 per cent at 3,273 ringgit ($1,060) after hitting a 26-month high at 3,348 ringgit, a level not seen since July 18, 2008.

On the Multi Commodity Exchange, crude palm oil contracts for near-month (November) delivery rose 1.26 per cent to Rs 484 per 10 kg, on firm support from global markets. The move was also fuelled by increased demand in the spot market.

Mistry estimated the world production of palm oil in calendar year 2010 would expand little, about 300,000 tonnes. Production growth would be negative in Malaysia and mildly positive in Indonesia. The biological cycle is likely to turn upwards from April 2011 and that should be the beginning of strong growth in production.

Malaysian CPO production is estimated at 17.2 million tonnes for 2010, slightly less than in 2009. The production shortfall is primarily due to the El Nino weather effect. Rainfall in terms of volume and distribution is critical for the oil palm and a big disturbance like an El Nino can be disruptive.

“However, I am afraid that level will not be sufficient to ration demand. The period of greatest tightness will be between February and May 2011 and we may require even higher prices in December and January to prepare the world for that tightness,” Mistry said.

source :  Bloomberg