Higher palm oil prices expected in 2009

Global palm oil prices are likely to rise in 2009 as stocks in key exporters Malaysia and Indonesia fall, Hamburg-based oilseeds analysts Oil World said yesterday.

“The palm oil market is torn between the bearish outside developments, especially very weak crude mineral oil, and its own constructive longer-term fundamentals,” it said.

Palm oil prices have fallen by almost 60 per cent from a record high in March after the global economic crisis hit commodity markets.

“We expect appreciating palm oil prices in 2009 due to the prospective reduction in Malaysian and Indonesian palm oil stocks in December/June 2008/09 resulting from a decline in the biological yield cycle, seasonally lower production (and) higher demand for edible palm oil,” it said.

New government rules compelling more vegetable oil to be blended with fossil fuels to reduce pollution is also likely to generate extra demand for palm oil, it said. Indonesia, Malaysia and Colombia are among countries which are compelling more palm oil blending with fossil fuels.

“The current low palm oil prices, relative to other edible oils, will stimulate demand in the near to medium-term,” it said. “The decline in world exports of soy oil will shift demand to palm oil.”

But it warned the global economic crisis made physical palm oil demand difficult to assess. - Reuters

Something2Share:

With the recent sudden drastic drop in CPO price, everyone in the plantation sector in Malaysia and Indonesia has been very panic striken. Cutting cost has been the major issue for reviewing Budget 2009. In view of the high cost of fertilizers, the top management teams have been debating on reducing fertilizer input in 2009. The main concern is how to maintain the cost of production so as there will be still room for making profit. To the employed planters, they are most worried about “hair-cut” on their salaries and bonus since Christmas, 2009 New Year and Chinese New Year are around the corner.

The above news is, indeed, very encouraging and I believe it’s a booster jab for the plantation companies, the plantation owners and the planters. If what is expected (appreciating pal oil prices in 2009) comes true, at least we are able see light in a dark tunnel.