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Worst is over for crude palm oil
The worst is over for crude palm oil (CPO), as its price had recovered from a five year-low in September
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The worst is over for crude palm oil (CPO), as its price had recovered from a five year-low in September.
But ample supply of vegetable oils coming into the market over the next six months will keep near-term price increases in check, experts say.
'We have seen the bottom for soybean and CPO, but the upside potential for price recovery is limited,' Oil World executive director Thomas Mielke told a conference here.
The benchmark CPO futures contract traded on Bursa Derivatives had rallied by about 300 ringgit (US$91.22) from a low of 1,914 ringgit (US$581.98) a tonne on Sept 2.
The quick recovery was driven by slower than expected soybean production in key producing regions in Brazil and Argentina.
Soybean can be crushed to extract oil and compete with CPO as cooking oil used in Asian homes.
Meanwhile, CPO prices were also supported by surging exports to key buyers India and China, as importers took advantage of cheap prices to boost up their stockpile.
'CPO stockpile in Malaysia will peak in October and gradually decline until July 2015,' Godrej International Ltd director Dorab Mistry told the audience at the Malaysian Palm Oil Trade Fair and Seminar yesterday.
He predicted that total production in Malaysia to slow down to 19.6 million tonnes in 2014.
'I estimated that the dry patch in March and April took out about 300,000 tonnes in production,' Mistry said.
He also estimated that the drought in Kalimantan would keep production in Indonesia at below 30 million tonnes this year.
While CPO prices had rallied strongly over the past two months, its upside potential could be capped by falling crude oil prices. (***)
