Agro Perspectiva

Palm Oil Prices May Weaken on Supply, Macquarie Says

18.06.2010 10:29 "Agro Perspectiva" (Kyiv) — Palm oil prices may decline in the third quarter on increased supply of the tropical oil and its substitute, soybean oil, Macquarie Capital Securities (Malaysia) Sdn. analyst Sunaina Dhanuka said in an e-mailed report. Palm oil futures on the Malaysia Derivatives Exchange could average 2,450 ringgit ($751) a metric ton in the third quarter, from a forecast of 2,475 ringgit a ton this quarter, she said. The most active contract has averaged 2,489 ringgit so far this quarter. Her third-quarter forecast compares to an average of 2,204 ringgit in the same period last year. «In the near term, fundamentals remain weak and will continue to pressure prices over the course of the year, driven by record soybean stocks,» Dhanuka said. Palm oil and soybean oil account for more than three-fifths of edible oils consumed worldwide. Palm oil is mainly produced in Indonesia and Malaysia, and soybeans in the U.S., Brazil and Argentina. Palm oil prices rose 57 percent in 2009 amid concern of El Nino weather affecting oil palms, while the South American soybean crop was ravaged by drought. Palm oil prices have fallen 10 percent this year as a record global soybean crop is replenishing stockpiles and easing supply concerns. OilWorld, an industry publication, raised its forecast for global output of 10 oilseeds for 2010–2011 to a record 438.8 million tons, from 438.7 million last year. It raised its Argentina soybean estimate by 0.7 million tons to 55 million tons compared to a drought-affected harvest of 31.5 million tons. Its South American crop forecast is 136 million tons, from 97 million tons last year, with harvests ending last month, it said. «Supplies of soybeans have become ample,» and soybean stocks will be «substantial» until August, which will have a bearish impact on edible oils prices, it said in its June 11 weekly report. Dhanuka forecast an average of 2,500 ringgit this year, compared to the current year-to-date average of 2,529 ringgit, rising to an average of 2,610 ringgit next year, according to Bloomberg data. Dry weather last year and earlier this year may hurt fourth-quarter oil palm yields, she added, lifting average prices to 2,550 ringgit in the last quarter and 2,750 ringgit in the first quarter of 2011. PT Astra Agro Lestari, Indonesia’s top publicly traded plantation company, yesterday said drought hurt palm oil output for January-May, which fell 3 percent to 373,631 tons from a year earlier. Palm oil futures for September delivery advanced 0.4 percent to 2,408 ringgit ($742) a ton at 11:43 a.m. in Singapore.