JAKARTA, Nov 8 (Reuters) - Benchmark
Malaysian palm oil prices must stay at around 2,200 ringgit ($720) a
tonne for two months in order to stimulate demand for the edible oil and reduce
high stock levels, a leading industry analyst said on Thursday.
Malaysian palm oil prices Jan 2013 contract
have already lost about a quarter this year to trade at around 2,400 ringgit
($780) a tonne, as stocks rise in top producers Indonesia and Malaysia and
demand slumps, hit by a global economic downturn.
But palm prices must fall further
within the next 4 to 6 weeks to lure buyers and cut back inventories, said
Dorab Mistry, head of edible oil trading at Indian conglomerate Godrej
Industries.
"One thing is crystal clear.
Futures are very overpriced at present," Mistry said in a speech to be
delivered at an industry meeting in the Chinese city of Guangzhou.
Last month, second-largest producer
Malaysia said it would cut export taxes next year, which has helped support
crude palm oil prices. The government also said it would scrap duty-free export
quotas.
Mistry said that by January, the
government would have to announce loopholes and exemptions to this new export
tax regime to allow substantial duty-free exports of crude palm oil, otherwise
monthly exports will fall.
"In their euphoria, plantation
groups and their cheerleaders have overlooked one simple but significant
fact," Mistry said. "In the last fortnight, palm oil has completely
priced itself out of any meaningful energy demand," he added.
STOCKS TO MARCH HIGHER
Seasonally strong production may
have driven Malaysian palm oil stocks to another record high in October, a
Reuters survey of five plantation firms showed this week.
Inventory levels may have grown 7.5
percent in October to 2.67 million tonnes from a previous peak of 2.48 million
in September, the poll showed.
Malaysian palm oil stocks are likely
to increase further in November and December, Mistry said, adding that they
will total 3 million tonnes by Jan. 1 next year.
Crude palm oil production will be
18.4 million tonnes by Malaysia this year and 27.5 million by Indonesia, he
estimated.
Output prospects next year had
brightened as a result of the fadeout of the El Nino weather event and better
rain, he added.
Turning to rival edible oil soyoil,
Mistry said prices of soybeans SX2,
now trading at about $15.18-1/4 a bushel, would depend on the weather, acreage
and pace of planting in South America, and crucially, releases from Chinese
state reserves.
"If the state reserve releases
another 2 million tonnes of soybeans between now and March, Chinese imports
will be reduced to that extent, and prices need not rise to $18," he said.
"Prices around $16 will be
sufficient to see us through until new crop Brazilian supplies come to
market."
