There was "a powerful bull market which has yet to realise its full potential," Bloomberg quoted Dorab Mistry, director of Godrej International Ltd, as saying yesterday in remarks prepared for an industry conference in Tokyo. Palm oil traded yesterday in Malaysia at about 14% less than Mistry's target threshold.

India, the largest consumer of palm oil after China, may boost consumption of all vegetable oils to 12.8kg per head per year in the 12 months to October, about 12% more than the year before, Mistry said in the remarks. Godrej is one of the largest importers of edible oils into India.

"Price-conscious markets like India will chase palm," he wrote in the address, saying there had been a "phenomenal" rise in the nation's usage of vegetable oils. "India's imports of vegetable oil will continue to exceed the previous year's."

Palm oil for July delivery dropped 3.2% to RM2,580 a tonne at the 12.30pm trading break. Still, the world's most consumed cooking oil has advanced 52% this year. In 2008, the contract plunged 44% amid the global recession.

"It is not wise for me to speculate on how high prices will go," Mistry wrote, without giving a precise forecast. "However, the powerful injection of liquidity in all our economies must create inflation at some point down the road."

Central banks worldwide have been printing money to combat the global recession, triggering concern that inflation may accelerate. Some investors buy commodities, including palm oil, to hedge against increasing consumer prices.

Palm oil exports from Malaysia to India in the first four months of the year more than tripled to 608,440 tonnes, according to independent cargo surveyor Societe Generale de Surveillance (SGS). The surge made up for the 12% drop in exports to China to 1.14 million tonnes from the same period a year ago, SGS said.

Global demand for five major edible oils, including palm oil and soybean oil, will probably rise by 4.5 million tonnes in 2008-2009, matching the increase the previous year, Mistry said. Still, global supply growth will slow to 2.85 million tonnes compared with 5.65 million tonnes in the last crop year, he said.

Mistry didn't give a forecast for soybean oil, while highlighting a reduced soybean harvest in Argentina, and lower-than-expected planting in the US.

Soybean oil traded in Chicago has gained 12% this year to 37.66 cents a pound at 12.45pm Singapore time yesterday. The oil trades at a 14.9% premium to palm oil, according to Bloomberg data.

Meanwhile, ECMLibra Investment Research remained overweight on the plantation sector, but was looking to review its call on the sector depending on production expectations at home and soy market developments abroad.

It downgraded IOI Corporation Bhd to a sell as the current price had exceeded its RM4 target price, after the plantation group reported results that were slightly below its expectations but within consensus.

ECMLibra said IOI Corp had a tough third quarter on lower yields and production, and continued to be plagued by forex losses on US dollar borrowings, while its resource-based manufacturing segment still saw RM4.8 million of defaulted contracts.

IOI Corp closed eight sen lower yesterday at RM4.36.