Palm oil futures may rise to RM2,700 a tonne by June, says Mistry

File pic: Godrej International Ltd.

KUALA LUMPUR: Godrej International Ltd.’s Dorab Mistry is turning slightly bullish on palm oil.

Benchmark palm oil futures may gradually rise to RM2,700 (US$690) a tonne by June, the highest level since November, Mistry said at an industry conference On Tuesday. 

He trimmed his production estimates for top growers Indonesia and Malaysia by 500,000 tonnes each to 37.5 million tonnes and 20.5 million tonnes respectively. 

Crude palm oil prices in Rotterdam may rise to US$750 a tonne, he said

Palm oil climbed 2.7 percent in February to close the month at RM2,559 as a drought in Argentina sent soybean prices surging. 

However, palm prices have fallen about 4% this month after top buyer India increased import duties, triggering concerns of a reduction in appetite for the oil used in everything from cooking oil to shampoo. 

In January, Mistry saw palm trading in a range of RM2,500 and RM2,700 until August.

In an alternative bullish scenario, oil palms could suffer tree stress as haze returns to Southeast Asia this year, leaving Malaysian output unchanged in 2018 and Indonesian production up by just 2 million tonnes, Mistry said. 

Consumption of an extra one million tons of palm-biodiesel in Indonesia could be a game changer, he added. 

In that scenario, combined stockpiles in the two countries could be well below 4.5 million tonnes, or even nearer to 4 million tonnes, by July, Mistry said. 

Although such “fireworks” aren’t expected, Rotterdam prices of crude palm oil may reach US$800 a tonne, he said.

High import duties on palm oil in India is a temporary solution, Mistry said, adding that it would be better to cut taxes on crude palm oil to 34 percent. 

That would widen its spread to refined, bleached and deodorized olein and lead to a big increase in refining activity. 

Still, inflation may soon be a problem for India and the import taxes may fall by May, he said. - Bloomberg