Palm oil heading for $300 per ton in European trade<\/p>\n
LONDON (Reuters): As palm oil prices continued to fall on
\nWednesday morning, European traders said they could be heading
\nfor $300 a ton, a level not seen since the mid-1980s.<\/p>\n
Crude palm oil started the day in Europe at $335 a ton for
\nJuly and August\/September and $337.50 for October\/December,
\naround $5 to $10 a ton down from Tuesday's close.<\/p>\n
Prices have now come down by some $180 a ton in the past year,
\nand traders said they could not see a bottom to the market at the
\nmoment.<\/p>\n
\"I think we will see Chicago soybeans hit 400 cents a bushel,
\nand soy oil 15 cents a lb, which makes $300 a ton a possibility
\nfor crude palm oil,\" said one trader.<\/p>\n
\"People have tried to forecast support levels and but each one
\nhas been past and the market just keeps on going down,\" said
\nanother.<\/p>\n
The European market was depressed by overnight losses in
\nChicago futures and a report by crop forecaster Ivan Wong putting
\npalm oil stocks in Malaysia, the world's biggest producer, at
\nover one million tonnes.<\/p>\n
On the U.S. market a combination of good crop growing
\nconditions in the Midwest and fund selling took soybean futures
\nto a 27-year low of 413-3\/4 cents for the July contract on
\nTuesday and July soy oil to a 12-year low of 15.36 cents.<\/p>\n
Wong in his latest report estimated that local palm oil output
\nwas 962,000 tons in June, down 4.5 percent from May. But stocks
\nwere projected to increase from 967,721 tons at end-May to 1.06
\nmillion tons at the end of last month.<\/p>\n
With production in Malaysia rising and Indonesia -- the second
\nlargest producer of palm oil -- again active in the market after
\ncutting export duties last Friday, traders do not see much hope
\nan improvement in prices over the next two years.<\/p>\n
\"Indonesia is fast catching up with Malaysia in palm oil
\noutput and barring some kind of major disaster we are looking at
\npalm oil prices in the $300 to $350 range over the next two years
\nat least,\" said one trader.<\/p>\n
However, providing world prices remained above the cost of
\nproduction, they could not see producers cutting back output.<\/p>\n
\"While plantations in Malaysian and Indonesia keep on making
\nmoney they won't cut back production and I think there is a long
\nway to go before we reach that level,\" said a trader.<\/p>\n
The more immediate danger for the market was the possibility
\nof defaults as buyers tried to dump more expensive contracts to
\ntake advantage of lower prices.<\/p>\n
If a buyer defaults on a contract there is little sellers can
\ndo on the international vegetable oil market, where business is
\ncarried out by telephone, telex, fax and e-mail.<\/p>\n
\"All you can hope is that your buyer will play the game. Most
\nwill, but there are always one or two who won't and that is where
\nthe problems could come from for some people,\" said a trader.<\/p>\n
Any hope of large buying orders from China seem to have
\ndisappeared. Traders have been waiting for Beijing to issue new
\nimport quotas for edible oil.<\/p>\n
\"All they have to do is keeping issuing small licences for
\nimports, which won't effect prices in anyway,\" said a trader.
\n\"After all, they do not owe the market any favors.\"<\/p>",
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