Crude Palm Oil Update Issue

Crude Palm Oil Update Issue

The price of palm oil could jump more than expected to 2700 ringgit per metric ton in the second quarter, the highest since the beginning of 2014, due to lower production and dry weather throughout Southeast Asia, analysts said Dorab Mistry vegetable oils.

Concern that drought related to El Nino weather pattern will reduce the harvest of fresh fruit bunches at the top producers Indonesia and Malaysia have raised the price of palm oil to near 21-month high of 2604 ringgit ($ 626.71) per metric ton.

Malaysia production tends to decrease from January to June, said Dorab Mistry. The production can only be increased in July, he added.

"Charging the inventory can take a little longer – may to September 2016.0" says Mistry on Pakistan's Edible Oils Conference on Sunday.

This condition could potentially push prices of palm oil to 2700 ringgit in the second quarter, said Mistry, who previously have estimated the price at a higher end of 2,100-2,400 ringgit range for the period.

He did not give a new estimate of output. In November, he said global production will grow by one million metric tons in 2016 at 63,000,000, less than previously expected because of El Nino.

However, other vegetable oil analyst James Fry said if the drought due to the El Ninoended in the middle of the year, production in Southeast Asia could be down 4 million tons by 2016.

Crude Palm Oil Update Issue

"Even without El Nino, Indonesia will be static production by 2016, while Malaysia's production will fall a little bit ... as a result of the recent drought," said Fry, the Chairman of the commodities consultancy LMC International, said at the Conference.

"However, new full El Nino drought will mean that all bets are cancelled. Crude palm oil (CPO) prices rose to the point where the world will turn to the soyoil to fill in some of the missing equipment, "he added

CPO prices to predict the FRY free on-Board will climb above $ 600 per ton in March2016 and reach $ 650-$ 675 in mid-2016 because Indonesia more Palm-basedbiodiesel use. CPO was at $ 592 on Friday.

However, any flaws in the production of palm oil could tighten supply of Indonesia, making it difficult for producers to meet its mandate for blending palm oil intobiodiesel.

Industry participants are already skeptical about the mandate that was given due tocrude oil price anjloknya that make palm oil less attractive to the mix.

Indonesia is currently trying to raise the minimum oil bio gas to 20 percent this year in order to create new demand for tropical oils and cut fossil fuel import bills.

Indonesia absorbing 220,000 metric tons of palm oil per month under the current mandate, according to Mistry, but continuous consumption may not be viable in may 2016. "This can aggravate shortages and forcing price rises to a level where Palmbegan to lose market share," he said.