Traders Upbeat on Palm Oil’s Performance

PALM oil traders are optimistic of the commodity’s performance this year, putting the average price of crude palm oil (CPO) at RM1,500 a tonne against last year’s RM1,394.

In 2004, the average CPO price was trading at a high average of RM1,610.

“This year, we’re forecasting CPO to trade in the range of RM1,400 and RM1,600 per tonne, which is between last year’s average of RM1,394 and 2004′s RM1,610,” Malaysian Palm Oil Promotion Council chief executive officer Tan Sri Dr Yusof Basiron said.

The average price forecast for 2006 came out of the globally- monitored Bursa Malaysia’s Annual Palm and Lauric Oils Conference and Exhibition, which ended yesterday.

Yusof, who chaired the panel discussion, said historically, the conference’s estimate of palm oil’s average price has been quite accurate.

“The demand for palm oil is expected to be encouraging with the abolishing of palm oil import quota by China, trans-fat labelling in the US and increasing worldwide demand for biodiesel,” Yusof said.

Last year, Malaysian Palm Oil Board’s data showed that palm oil exports to the US rose by almost two-thirds to 0.56 million tonnes as global food manufactures switched to palm oil in anticipation of trans- fat labelling which came into effect on January 1.

Next month, Prime Minister Datuk Seri Abdullah Ahmad Badawi is expected to launch the B5 blend of biodiesel and selected government agencies will be tasked to use the fuel. The country’s palm oil stockpiles will see a slight dip, which eventually will push prices up.

United Plantations Bhd vice- chairman Carl Bek-Nielsen expects Malaysia’s CPO output in 2006 to be more than 15 million tonnes, against 14.96 million tonnes in 2005 and 13.98 million tonnes in 2004.

“My price outlook for 2006 ranges between RM1,500 and RM1,600 a tonne, with an average of RM1,550. If biodiesel exports from Malaysia kick in this year, we’ll see a price increase then,” he said.

Thomas Mielke, who was one of the panelists, forecasts that from March until May, CPO is likely to trade at between RM1,420 and RM1,550 a tonne. And this will heighten in the second half of the year at between RM1,450 and RM1,600 per tonne.

Mielke is director of Hamburg-based Oil World’s estimates, which are closely watched by traders of edible oils.

“We’re going to see higher growth in world oils and fats demand against production,” Mielke said.

World consumption of edible oils is expected to grow by over 7 million tonnes for a second straight year in 2006, underpinned by the emerging use of edible oils as a fuel source, particularly in Europe.

“Also, we think that by next week, the Indian Government may reduce import tax on palm oil. If this happens, it’ll be good news for CPO prices,” he added.