KUALA LUMPUR, June 7 (Reuters) - Malaysian palm oil futures could fall to 2,700 ringgit-2,800 ringgit ($854-$886) per tonne with the euro debt crisis and lack of monetary stimulus clouding the global economic outlook and crimping commodity demand, a leading analyst said on Thursday.
The forecast by Dorab Mistry, head of vegetable oil trading with Indian conglomerate Godrej Industries , represents up to a 10 percent drop from the current 3,000 ringgit per tonne as food demand from China and India has not been immune to slowing growth.
"I no longer expect prices to reach 4,000 ringgit in view of the changed macro economic scenario," Mistry said in a speech to be delivered at an industry seminar in the Indian port city of Mumbai.
"My forecast of the fundamentals of crude palm oil production was correct, but the macro situation has been very poor," he said, in reference to tight supply in Malaysia, the world's No.2 producer.
If there is a repeat of the 2008 financial crisis, Mistry said prices could "collapse" to 2,200 ringgit although "the likelihood of that happening is no more than 20 percent."
Palm oil prices may eventually recover to a level of 3,300 ringgit, he said without giving a time-frame, as the decline in the futures and falling production in Malaysia attracts more buyers.
Any stimulus from the United States, Europe or China, could encourage a speedier recovery, Mistry said, with palm oil rising to a peak of 3,500 ringgit over the next few months.
PALM OIL SUPPLY SQUEEZE
Mistry said "something odd" was happening in Malaysian plantations with combined output in the first five months of 2012 at less than 500,000 tonnes compared to a deficit of 53,969 tonnes in the same period in 2011.
"I expect the same struggling performance from the oil palm in Malaysia in June and July also. It is conceivable that the year-on-year deficit January to July will be a record 900,000 tonnes, he said.
The El Nino weather condition, which is set to emerge in August and brings a dry spell to Southeast Asia, could help prices recover, although Mistry said he would not be computing its effect into his forecasts this time.
Hot weather usually accelerates the ripening of oil palm fruits. However, prolonged exposure to heat will trigger yield stress in the trees, eventually crimping production.
When the last El Nino episode occurred in early 2010, yields weakened in Indonesia and Malaysia and lifted prices above 2,500 ringgit in the first quarter of that year.
"There are now definite signals of an emerging El Nino. If those signals give us an El Nino, prices will recover faster than most people expect," he said.
