Global palm production to rise after short-term dip

"We are in a period where with growing maturity, there should be sizable increases in CPO production for the next 3-5 years," James Fry (filepic) said in a speech at the International Palm Oil Congress and Exhibition conference in Kuala Lumpur late on Tuesday.

KUALA LUMPUR: Crude palm oil should record sizeable increases in production over the next three to five years as new plantings reach maturity, but not before a short-term decline in output growth, leading industry analyst James Fry said.

Dry weather from a possible El Nino event, the failure of smallholders to use fertiliser and less sun exposure for crops due to smoke haze in leading producers Indonesia and Malaysia could all combine to lower yields over the next 18 months.

"But you have another underlying cycle," said Fry, chairman of commodities consultancy LMC International, pointing to increased yields from newer trees planted in Kalimantan, Indonesia and Malaysia's east coast state of Sarawak.

"We are in a period where with growing maturity, there should be sizable increases in CPO production for the next 3-5 years," he said in a speech at the International Palm Oil Congress and Exhibition conference in Kuala Lumpur late on Tuesday.

"These are new areas, it takes years to come to peak production so we're waiting for this backlog of trees that have been planted," he said.

"You're looking at growth of 3-4 percent a year on average from new maturing areas."

Fry also said the floor price for palm oil would be determined by crude oil, which he expected to hold above $30 and below $100.

"We are going to see an emergence of a price band in the petroleum market where shale oil producers come in and out according to profitability, stopping crude oil from ever going up to $100 again and from falling below $30 a barrel," he said.

"Palm oil, as the other oils, will be tied to that price band."- Reuters