PETALING JAYA: Palm oil may climb about 15% from current levels to exceed RM5,000 (US$1,191) a tonne by year-end, after the crop’s seasonally-high production cycle ends, according to veteran trader Dorab Mistry.
Prices of the world’s most-consumed cooking oil may even jump to RM5,500, the highest since June 2022, in the first quarter of next year if top grower Indonesia continues to seize plantations and raises the biofuel mix in diesel to 50%, Mistry, director at Godrej International Ltd, said in slides prepared for a conference in Colombia.
“Palm oil production has become flat,” said Mistry, who has been trading vegetable oils for over three decades.
Palm oil’s productivity growth has slipped to zero or even negative, while planting of soybeans, sunflower and rapeseed is not expanding because oilseed prices are not attractive, he said.
Mistry’s comments come at a time when investors are dealing with volatile prices, driven by trade tensions and uncertain supplies.
Palm oil, used in both food and biofuels, has struggled to regain momentum after a sharp rally earlier this year.
As the tropical oil reacts to supply changes in top growers and shifts in energy policy, weaker-than-expected production or more oil used for fuel could push up global food inflation and raise industrial costs.
“If Indonesia goes to B50, there will be shortages of palm oil and prices will rocket,” Mistry said, adding that the South-East Asian nation should lift its moratorium on new plantations as it has led to a stagnation in production.
However, Indonesia’s policy of taking control of “private but not fully legal plantations is a big worry” as estates that have been seized or are slated for takeover will show a decline in their productivity, he said.
In neighbouring Malaysia, palm trees are ageing and there’s been very little replanting, he said.
Prices of soybean oil, palm’s closest food and fuel rival, will also remain strong due to the US biodiesel regime and could climb to 70 cents a pound, Mistry said. That would be a jump of more than 40% from current levels. — Bloomberg
