Palm oil is expected to drop on increasing global supplies according to Mistry

According to Dorab Mistry, director at Godrej International Ltd., palm, the world’s most common cooking oil, may drop to the lowest level since 2009 by January as global supplies of edible oils grow larger and crude oil weakens. Futures are expected pull back to 2,000 ringgit a metric ton in Kuala Lumpur if Argentina and Brazil, the largest soybean cultivators after the U.S. harvest bigger crops and Brent crude drops below 100 USD a barrel. Prices are expected to stay above 2,200 ringgit in the next few weeks and will trade between 2,200 and 2,400 ringgit, according to Mistry who also said: “The fundamentals of the oilseed and vegetable oils complex are clearly bearish. We cannot expect a bull market in vegetable oil prices any time in 2013-2014 unless we have adverse weather”.

Palm for December delivery closed at a five-week low of 2,300 ringgit on Bursa Malaysia Derivatives on September 20. Palm futures had the highest monthly gain in August since December 2010 as crude oil reached a two-year high, a weak ringgit boosted Malaysian exports and hot and dry weather hurt the U.S. soybean crop.

Soybean prices soared on the Chicago Board of Trade to 21% since August 7 as prospects for the U.S. harvest declined. Futures closed at a four-week low of 13.1525 USD a bushel on September 20.

“If South America plantings get off to a good start and rainfall is near normal, I expect the soya market to decline sharply from current levels around Christmas time. We must also expect harvest lows between now and November in the U.S. So far in the soya world, traders have been focusing on supply and are not looking at demand”, said Mistry.

Production of sunflower seed in Ukraine, Russia and Eastern Europe surpassed expectations, pushing sunflower oil to a discount to soybean oil which will continue until June, said Mistry. That discount will make possible for sunflower oil to grab market share, he said.

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