Dorab Mistry: Palm oil may touch US$955 on tight supplies; increase in export levies by top grower Indonesia

JAKARTA/KUALA LUMPUR, Sept 25 (Bloomberg): Palm oil futures will stay strong at least until March on an increase in export levies by top grower Indonesia, with supplies seen tight during the first two months of 2022, according to veteran trader Dorab Mistry.

The most-used vegetable oil is expected to trade between RM4,000 (US$955) to RM4,400 per ton during the October-February period, before slightly dropping in March, Mistry, director at Godrej International Ltd., said at the Globoil conference on Saturday.

Futures have averaged 3,908 ringgit so far this year, according to data compiled by Bloomberg.

Higher benchmark prices may potentially curb purchases by top importer India in the coming months as the festive-season buying by the South Asian nation will almost be over by next month. Malaysian stockpiles may swell further going forward, after surging 25% in August from a month earlier.

Palm oil prices will be underpinned by Indonesia’s biofuel mandate and higher export taxes, Mistry said. Indonesia last month raised its palm oil export duty for September to $166 a ton from $93 a month earlier following a rally in the tropical oil. Any move by Indonesia to increase its export tax generally boosts demand for Malaysian palm oil and supports futures in Kuala Lumpur.

Mistry said benchmark prices may slide to 3,200 ringgit-3,800 ringgit during April to September on expectations of favorable weather conditions for oil palm trees. The commodity has jumped more than 23% this quarter mainly on supply concerns and a rally in soybean oil, palm’s closest food and fuel substitute.

Mistry’s April-September price outlook is based on assumptions that there will be no damage due to adverse weather conditions, no further increase in biofuel mandates, and the coronavirus situation will stay under control. - Bloomberg

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