(March 5): Stagnating production and dwindling stockpiles will underpin palm oil prices relative to other edible oils in the near term, according to veteran trader Dorab Mistry.
Production in top grower Indonesia may fall by at least a million tons in 2024, while Malaysian output could remain flat, said Mistry, a director at Godrej International Ltd. The trend is likely to last at least five years, as the industry contends with ageing trees, erratic weather and little improvement in farming practices, he said in an interview.
“I think you have to be reasonably bullish on all oils, but particularly palm,” due to output constraints, he said on the sidelines of the Palm & Lauric Oils Price Outlook Conference in Kuala Lumpur. While production of other oilseeds is set to climb this year, “palm is unfortunately the laggard”, he said.
These supply problems are upsetting the hefty discount palm typically has to alternative oils. The tropical oil is trading at a premium to soybean oil and sunflower oil in some markets, an unusual phenomenon that’s set to continue until around October when palm production seasonally peaks, said Mistry, who has traded vegetable oils for decades.
Benchmark palm oil futures have risen about 6% this year and traded at RM3,942 a ton on Tuesday in Kuala Lumpur.
Unpredictable weather is also a major wildcard for crop markets. Benign conditions have generally favoured recent harvests and helped send a gauge of grain and oilseed prices to the lowest level in more than three years. But that may not last.
“We dodged bullets in several parts of the world” last year, Mistry said. “We have got to be on our guard.”
More from the interview:
- US is emerging as an important importer of palm oil, driven by demand for renewable fuels
- Palm will eventually regain its market share in India, with total annual imports remaining close to 10 million tons
- Shipping disruptions in the Red Sea caused temporary shortages of vegetable oil in India, but the market is now adapting.
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