Palm may rise 10% before dropping on supply recovery - Mistry

Leading vegetable oils analyst Dorab Mistry. He is also the director of Godrej International Ltd

NUSA DUA, Indonesia: Palm oil prices could rise 10 percent from current levels by the first quarter of 2017, before declining again as stockpiles recover, leading industry analyst Dorab Mistry said on Friday.

Benchmark palm oil prices have surged about 20 percent so far this year, lifted by a weaker ringgit and strong markets for rival edible oils.

They hit a four-year high of 3,098 ringgit ($694.62) on Thursday, tracking soyoil higher.

"From now until end-March 2017, crude palm oil (CPO) prices should trade in a range from 3,000-3,300 ringgit. The weakness of the ringgit makes it probable that we shall exceed 3,300 ringgit at some stage," Mistry, director of Indian consumer goods company Godrej International, said at a palm oil conference in Bali.

Markets are also being supported by bullish movements in agricultural commodities, potential price support measures by the Malaysian government ahead of an election year and higher U.S. biodiesel mandates, Mistry said.

However, he added that a recovery in production from last year's crop-damaging El Nino weather event would push down prices to 2,400 ringgit by June 2017.

Refined, bleached and deodorized (RBD) palm olein prices could reach $750 a tonne on a free-on-board basis (FOB) by the first quarter of 2017, and dip to $650 FOB by June, from a front month price of $722.50 at present.

Mistry maintained his forecast for global palm oil output to recover to nearly 6.5 million tonnes in the 2016/17 oil year.

He pegged Malaysia's production at 19.5 million tonnes for the 2017 calendar year, up from 17.3-17.4 million tonnes this year. Indonesian output is seen rising to 33-33.5 million tonnes next year from 29 million tonnes in 2016.

Indonesia and Malaysia, which contribute to over 80 percent of global palm oil, churned out 32 million tonnes and 19.96 million tonnes of CPO respectively in 2015.

"It must be remembered production recovery has commenced in Indonesia already. Malaysian production can be expected to recover from next month," said Mistry, forecasting year-on-year growth for Malaysia's December palm oil production.

Prices of lauric oil, edible oils with high levels of lauric acid, are also set to decline from Q2 2017, he said, as supplies of crude palm kernel oil rise in line with a recovery in CPO output, he said. ($1 = 4.4600 ringgit)- Reuters