KUALA LUMPUR: Palm oil climbed to the highest level in six months after analysts predicted prices may increase 20 percent in the first half of next year as drought disrupts supplies and demand grows in China and India, the biggest users.
The cooking oil advanced 3.4 percent to 2,562 ringgit ($758) a metric ton, the highest price since June 4. Prices may soar to 3,000 ringgit a ton by March, said Dorab Mistry, director of Godrej International Ltd., one of India?s biggest edible oil buyers. He previously predicted 3,000 ringgit by the end of 2010. His forecast compared with 2,493 ringgit at the end of morning trading in Kuala Lumpur.
Palm oil, used in cooking and as an alternative fuel, advanced 50 percent this year as investors bought commodities as a haven from a declining dollar. Vegetable oils climbed about 20 percent in November from a year earlier, the first gain this year, according to the UN Food Agriculture Organization?s Food Price Index. The gauge rose to a record last year after concerns over food shortages spurred exporters to curb shipments.
?We must fear for crude palm oil production in 2010,? Mistry said at a conference in Bali. ?I expect palm oil prices to rise at the fastest pace in relation to all other vegetable oils. The spread between soybean oil and palm oil will undoubtedly narrow.?
The premium for cash Argentine soybean oil over Indonesian palm oil will narrow to $50 a ton by April next year, from about $150 now, he said.
Output in Malaysia, the second-largest producer, may drop to 17.5 million tons this year from last year?s record 17.7 million tons, Mistry said. Tree stress and dry weather from the developing El Nino has created a ?pessimistic outlook? for output in the second half of 2010, he said.
Ocean temperatures in the Pacific are ?increasingly consistent with past El Nino events,? the Australian Bureau of Meteorology said on Nov. 25. These conditions will persist into the first quarter of 2010, the bureau said.
India imported a record 8.7 million tons of vegetable oils in the year ended Oct. 30, the Solvent Extractors? Association said Nov. 16. Palm oil accounted for 80 percent.
China?s soybean imports in December may exceed the June record of 4.71 million tons, the China National Grain Oils Information Center said in a statement today. Chinese soybean purchases in the 12 months to July may exceed a previous forecast of 41 million tons, Thomas Mielke, chief executive of Oil World, said in Bali yesterday.
Palm oil for February delivery on the Malaysia Derivatives Exchange increased as much as 4.8 percent in intraday trading, the most since Aug. 3. ?Market sentiment was influenced by the bullish forecasts coming out? of the Bali conference, said Ryan Long, a trader at OSK Investment Bank in Kuala Lumpur. The gains ?triggered a massive short-covering spree,? he said.
Prices may reach 2,950 ringgit by June if crude oil trades at $75 a barrel, James Fry, managing director of LMC International Ltd., said in Bali today.
?Palm oil seems to be reinforcing its leading role as the main player in the world vegetable oil market, doing much more than others to determine prices,? Fry said. ?There is a feedback on prices from crude oil.?
The commodity will be supported early next year by lower- than-expected soybean supply before coming under pressure as the South American harvest gets under way from March, Mielke said.
?January-February soybean supplies are tight as stocks are still low,? he said yesterday.
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