Palm oil prices likely to slip this year amid higher stocks

Palm oil prices likely to slip this year amid higher stocks

KUALA LUMPUR (AFP): Local palm oil prices could plunge to 450
ringgit (US$180) a ton by December amid rising stocks if
Malaysia, the world's top producer, did not step up exports of
the commodity, officials have warned.

While the forecast on the degree of the decline varied,
officials concurred that 1994 would see lower prices for
Malaysian palm oil than 1993's average of 892 ringgit ($357) per
ton and 916 ringgit per ton in 1992.

"Overall, the monthly price will trend down from 850 ringgit
in January to 450 ringgit in December as stocks start
accumulating from July to reach 1.9 million ton by year-end,"
said Ramli Abdullah, a researcher with the Palm Oil Research
Institute of Malaysia (PORIM).

Local crude palm oil prices were averaging 1,063.50 ringgit a
ton on Friday, from 1,011.50 last month.

Ramli and co-researcher Mohd Nasir Amiruddin had a day earlier
told a palm oil outlook forum here that the inverse relationship
between stocks and price would still persist this year.

Prices could crash if nothing was done aggressively to alter
the level of the stocks in the wake of keen competition in world
markets from rival producer Indonesia, other analysts told the
forum.

A high-powered delegation, led by Primary Industries Minister
Lim Keng Yaik, is to leave for Japan, South Korea and Taiwan from
May 22-June 7 to enhance sales in traditional markets as well as
break into new ones, officials said.

Lim is also to lead a mission to Eastern Europe this year to
promote palm oil and other commodities.

More bullish officials, however, said although a seasonal rise
in production would push up stocks in the second half, increased
purchases from the European Union and populous China could absorb
the excess.

Exports

"Total exports are expected to rise and major importers will
be Pakistan, China, Egypt and Japan, with large off-takes likely
from the European Union and Singapore as transit trade," said
Mamat Salleh, deputy director-general of the Palm Oil
Registration and Licensing Authority (PORLA).

Mamat predicted palm oil prices to average between 850 and 900
ringgit for 1994.

But the Hamburg-based Oil World publication, widely monitored
by the vegetable oil industry, said Indonesia and Malaysia would
benefit from a shortfall in competing supplies and the growth in
global demand for palm oil.

"World palm oil import requirements are likely to rise sharply
by some 600,000 tons per year within the next 20 years," Thomas
Mielke, editor of the Oil World told the forum.

"It will not be easy for the palm oil producers to meet that
challenge (demand). And in any case future demand will be big
enough for both, Malaysia and Indonesia," he said.

Mielke said weather problems in important oilseed growing
areas in North America might even result in a renewed rally on
the oils and fats market in the 1994-1995 season.

Palm oil commands 35 percent of the world vegetable oil
market. Malaysia, whose output rose 16.1 percent to 7.4 million
tons last year, exports the commodity to 90 countries and is
scouting for more buyers as production is forecast to reach 8.6
million tons by 2,000.

Its export earnings from palm oil are expected to rise to 6.8
billion ringgit this year from 6.6 billion ringgit last year.

For Indonesia, officials said palm oil prices were likely to
rise one or two percent higher at $380 to $400 per ton this year
despite output rising to 4.1 million tons from 3.76 million tons
last year.