Crude palm oil (CPO) futures on the Bursa Malaysia Derivatives Exchange may fall to as low as 2,200 ringgit per tonne for the next few days, if struggling crude oil prices stabilise at around $100 a barrel, Dorab Mistry, director, Godrej International, said at the International Palm Oil Trade Fair & Seminar? ?POTS 2008? in Malaysia, on Monday.
?At that level, we should see a strong growth in demand. Soya oil, on the other hand, has to substantially decline from the current price-levels. If vegetable oils were not used for bio-fuel, the price level would be unthinkable,? he said. The benchmark November contract on the Bursa Malaysia was down 87 ringgit at 2,628 ringgit ($781) per tonne after a session?s low of 2,610 ringgit.
?We have seen crops get bigger as the growing season in the northern hemisphere has progressed. We have been most pleasantly surprised by yields in the EU and the size of expansion in the Ukraine and in southwest Russia. Above all, the expansion has come in high oil-bearing seeds?- rapeseed and sunseed,? he said.
?Palm production has also benefited from an extension of the high cycle. My earlier estimate was that the high cycle would come to an end anytime between June and September 2008. It appears that the cycle will stretch to the very end of this window and perhaps even stretch to October and November,? Mistry added.
Estimates of CPO production in Malaysia for calendar year 2008 have been revised to 17.4 million tonne. Similarly, Indonesian CPO production is likely to comfortably exceed 19 million tonne, he said. ?For the oil year October 2008 to September 2009, we are already seeing a big increase in the production of sunseed and rapeseed,? he said.
On the demand for biofuels, Mistry said that the global production of oilseeds was expanding with advances being made in technology as well as in acreage. On an average, the global demand for vegetable oil was expanding at about 6 million tonne per annum – 4 million tonne of edible demand and 2 million tonne for biofuels. ?In a few years, with good weather and rainfall, palm oil production alone would expand by more than 5 million tonne, more than the expansion in food demand. In order to preserve remunerative prices, we therefore need the additional demand from biofuels,? Mistry concluded.