Palm oil production in Indonesia and Malaysia may increase next year as the La Nina weather pattern, which brings wetter-than-usual weather, boosts productivity, potentially hurting prices. On the other hand, it may cause flood that can send price shooting to the sky.
Palm oil prices may decline in the third quarter on increased supply of the tropical oil and its substitute, soybean oil. Supplies of soybeans have become ample and soybean stocks will be substantial until August.
Crude palm oil production in Indonesia and Malaysia may rise further in the second half of the year. Southeast Asia's total palm oil stocks are likely to be around 3.6 million tons now as output in June would have risen significantly. Unofficial projections put current Indonesian stocks around 2 million tons. According to market participants, output in Malaysia would have risen some 15% in June while in Indonesia the gain was as much as 20% on month. Though output will increase in the second half, (overall) growth in CPO output may be muted in 2010 due to the residual effect of El-Nino.
Crude palm oil production in Indonesia and Malaysia may rise further in the second half of the year. Southeast Asia's total palm oil stocks are likely to be around 3.6 million tons now as output in June would have risen significantly. Unofficial projections put current Indonesian stocks around 2 million tons. According to market participants, output in Malaysia would have risen some 15% in June while in Indonesia the gain was as much as 20% on month. Though output will increase in the second half, (overall) growth in CPO output may be muted in 2010 due to the residual effect of El-Nino.
The outlook for palm oil is poor because beans could head towards $8.50 to $8.75 through the second half although disruptions caused by the weather may contribute to a speculative rally.
Rapeseed/Canola May Lend Minor Support
Rapeseed output in China, the largest user, may be as much as 15 percent smaller than estimated, which will help support soybean oil. The reduced output in China may help push rapeseed stockpiles below the 2007-2008 level, as Canada, the largest exporter, was forecast to lose 2 million tons of production in the 2010-2011 season on persistent wet weather.
India's Import Duty
Solvent Extractors’ Association of India (SEA) has reiterated its demand for imposition of a 10 per cent import duty on crude palm oil as well as raising the duty on refined oil to 17.5 per cent to protect the industry from excessive import of edible oils.There are fears that the area under soybean may drop substantially this year on the back of falling prices and large carryover stocks, pulling output way below last year’s level of around 10 million tonnes.
India has four million tonnes of soybean stock lying due to poor crushing. Still, at the moment, soybean crushing earns more margin than palm oil refining and consumption volume growth will hence be tilted towards soybeans/soybean oil more than palm oil. India, being a very price sensitive market, saw an 18% drop in palm oil imports over the first five months, while soyoil imports rose 59% as processors substitute more palm oil with soyoil.
India's Better Monsoon
Pickup in sowing in Maharashtra, Madhya Pradesh, top two soybean producing states due to arrival of monsoon. The weather is perfect for sowing and we may expect a good crop.
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