Palm oil prices to rise to RM2,400/T by end-March — analyst Mistry

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(Jan 19): Benchmark palm oil prices are expected to rise to RM2,400 a tonne by end-March, according to forecasts by industry analyst Dorab Mistry, as the market has "bottomed out".

The price forecast by Mistry, who is also the director of Indian consumer goods company Godrej International, assumes a Brent crude oil price of US$70-US$90 per barrel, he said.

"The market is hoping to see combined Malaysian and Indonesian stocks decline to about 6 million tonnes by April-May 2019," according to a presentation for an industry conference in Karachi that was viewed by Reuters.

Palm oil prices fell to three-year lows in November and December, as Southeast Asian inventories climbed to record levels amid weak demand.

Benchmark prices closed 1.1% higher at RM2,223 (US$540.88) a tonne on Friday evening.

Palm oil stocks in Indonesia were at 3.9 million tonnes in November, having peaked at close to 5 million tonnes in July. Malaysian inventories climbed to a record high of 3.2 million tonnes in December.

Palm oil inventories typically decline in the first quarter of the year in line with seasonal output falls.

Mistry, however, said yields this year may only bottom in April, with recovery being slower than usual, while overall global production growth is also set to slow compared to the previous year.

"Growth in palm production in 2019 will be much less — possibly 3 million tonnes at best," said Mistry, estimating Malaysia's output this year at 19 million to 19.5 million tonnes and Indonesia's at 44 million tonnes.

Yields in 2019 are expected to be impacted by a lack of fertiliser application last year due to low palm prices, especially among smallholders in Kalimantan, Indonesian, a key palm-producing region.

"From about July-August 2018, in Malaysia we had a high cycle for palm production. This high cycle will come to an end around February-March 2019," Mistry said.

"After that the trees will require a period of rest. Therefore, one cannot be too optimistic about second-half 2019 production."

Mistry pegged India's edible oil imports for the 2018/19 marketing year that started on Nov 1 at 15.7 million tonnes, up from 15 million tonnes the previous year primarily on more palm oil shipments.

"After February 2019, China may also import more palm biodiesel," Mistry said.

Chinese demand for palm oil, which solidifies in cold weather, tends to rise towards mid-year as the weather warms.

(US$1 = RM4.1100)