Vegetable oil prices, including those for palm oil, are set to rise by US$50-100/tonne by June, according to LMC International chairman James Fry.
"Prices of crude palm oil (CPO) and other oils depend on the outlook for palm oil stocks. Stocks will fall until mid-year, which will lift the CPO premium over Brent [crude oil price], especially if Indonesia maintains its heightened pace of biodiesel use," according to Fry's presentation at the Pakistan Edible Oil Conference (PEOC) in Karachi on 19 January.
“If this occurs, there is an upside of US$50-100 for oils by June,” Reuters reported Fry as saying. Crude oil benchmarks set the floor price for vegetable oils, he explained.
Benchmark palm oil prices had dropped to three-year lows thanks to high inventories and low demand. Palm oil was last up 1.1% at 2,223 ringgit (US$540.88)/tonne on 19 January. Southeast Asian palm oil stocks reached highs last year but were expected to come down in the next few months in line with seasonal production trends.
Stocks stood at 3.9M tonnes in November for world number one producer, Indonesia, after peaking close to 5M tonnes in July last year. The second-largest producer, Malaysia had stock highs of 3.2M tonnes in December.
To boost consumption, Indonesia raised its biodiesel mandate last year to 20% for all diesel fuel, rather than just for subsidised diesel users.
At an industry conference in Malaysia on 17 January, LMC International’s head of Southeast Asia, Julian McGill, said CPO prices were expected to rise to between 2,200 and 2,300 ringgit (US$535.98-$560.34)/tonne by June on seasonal stock declines.