DORAB MISTRY, DIRECTOR, GODREJ INTERNATIONAL PRICE OUTLOOK
- "The world economy faces challenging times in 2013. The biggest new factor is the emergence of the U.S. as a major crude oil producer. This is a game changer for energy prices."
- "One cannot be bullish on energy prices. This has a direct effect on the biggest bullish factor for palm oil -– biodiesel."
- Expects the third-month palm futures contract to trade at 2,300-2,500 ringgit per tonne from now until end-April, and warns that trading may become more volatile in the event elections are called in Malaysia during this period.
- Expects prices to decline to 2,200 ringgit or lower from mid-April.
- Sees July to August as a critica for the market, and the August USDA report on U.S. crop estimates could be a watershed. Prices may fall at this stage as the low production cycle is ending and the market looks to rapidly expand production.
- Does not expect futures to decline below 1,800 ringgit unless Brent crude declines to $80 per barrel.
- "As prices decline below 2,000 ringgit, plantations will begin to reduce fertiliser usage and harvest rounds will get longer. These should keep prices from falling further."
- Says price forecast is based on assumption that Brent crude will trade in a band between $90-110 per barrel, a relatively strong U.S. dollar and normal weather conditions.
- Threats to price forecast include backtracking on biodiesel mandates by the U.S. or withdrawal of the $1 per gallon blending credit.
INDIA
- Says India is going to harvest record rapeseed crop and a big wheat crop.
- Says both Malaysian and Indonesian exporters have been chanelling crude palm oil and palm olein into India, which has meant that prices of locally produced oils have fallen steadily. India is carrying record stocks of imported oils as well as record stocks of domestic oilseeds.
- Estimates current Indian stocks of all oils –- imported as well as domestic -- at almost 2 million tonnes, up 80 percent from March last year.
- "India's imports of edible and non-edible oils during the oil year November 2012 to October 2013 will also break all records."
- Says India to import 8.55 million tonnes of palm oil in the oil year of November 2012 to October 2013.
- "The recent statement in the Economic Survey of India released on Feb. 26 clearly states the intention of the Indian government to support prices of domestic oilseeds and oils, using the instrument of import duties."
- Expects the Indian government to revise the import duty on unrefined oil to 10 percent and on refined oil to 17.5 percent in April or latest May.
- Expects that by August to September, the import duty on unrefined oil will be further hiked to 20 percent and on refined oil to 27.5 percent.
INCREMENTAL SUPPLY/DEMAND
- Says palm oil's high production cycle extended further than initially thought and only ended in January. Expects low production cycle that begins in February to be shorter than previous cases due to better weather and should end around September.
- Estimates Malaysia's crude palm oil production at between 19.5 and 19.7 million tonnes in 2013. This is partly due to higher than expected acreage reaching maturity.
- Estimates Indonesian production of crude palm oil will top 30.5 million tonnes in 2013, a 9 percent increase from last year's 28 million tonnes.
- Says strong expansion of mature acreage in Thailand, Central America, Colombia and parts of Africa will lead to an extra 700,000 tonnes of crude palm oil in 2013, bringing global incremental supply to 3.9 million tonnes.
- Believes export taxes will soon become irrelevant because prices will be below threshold levels.
- "What interests me more is the anti-dumping duty that the EU is likely to impose on Indonesian palm methyl ester at some stage in 2013 but with retrospective effect from 2012."
- Says India will produce an extra 500,000 tonnes of rapeseed oil in the next 12 months.
- "The biggest supply response is being seen in soybeans. South America is now on course to produce about 140 million tonnes of soybeans in 2013. This is almost 30 million tonnes more than 2012."
- Expects global food demand to grow by 3.5 million tonnes due to lower prices and biodiesel demand worldwide to expand by about one million tonnes, leading to an incremental demand of about 4.5 million tonnes.
- Says incremental supply seen at 4.35 million tonnes.
- "We can see that incremental supply and demand are broadly in balance this year."
- Says post-September there will be large supplies of soybeans, sunflower seeds and even palm oil which will be entering a new biological high cycle. The oil year 2012/13 should also see the heaviest carry-over stocks in history.
- "Therefore the outlook further forward, given normal weather, is bearish."
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