Higher palm oil prices expected in 2009

HAMBURG: Global palm oil prices are likely to rise in 2009 as stocks in key exporters Malaysia and Indonesia fall, Hamburg-based oilseeds analysts Oil World said yesterday.

“The palm oil market is torn between the bearish outside developments, especially very weak crude mineral oil, and its own constructive longer-term fundamentals,” it said.

Palm oil prices have fallen by almost 60 per cent from a record high in March after the global economic crisis hit commodity markets.

“We expect appreciating palm oil prices in 2009 due to the prospective reduction in Malaysian and Indonesian palm oil stocks in December/June 2008/09 resulting from a decline in the biological yield cycle, seasonally lower production (and) higher demand for edible palm oil,” it said.

New government rules compelling more vegetable oil to be blended with fossil fuels to reduce pollution is also likely to generate extra demand for palm oil, it said. Indonesia, Malaysia and Colombia are among countries which are compelling more palm oil blending with fossil fuels.

“The current low palm oil prices, relative to other edible oils, will stimulate demand in the near to medium-term,” it said. “The decline in world exports of soy oil will shift demand to palm oil.”

But it warned the global economic crisis made physical palm oil demand difficult to assess. - Reuters

NST-91208