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.