HIGHLIGHTS-Key palm oil analysts call the market - RTRS

KUALA LUMPUR, Oct 16 (Reuters) - Following are comments by key analysts at a palm oil industry conference in Kuala Lumpur:

JAMES FRY, CHAIRMAN, LMC INTERNATIONAL

EXPORT TAXES AND EDIBLE OIL PRICES

"After over a year of hesitating, Malaysia has finally reacted with its own export tax reform. This, together with the emergence of price-sensitive biofuel demand, should stop stocks rising from December, pulling up the premium for palm oil over Brent crude."

"At that time, as South American soybean crop approach, the soy-palm oil premium should shrink, but more important than all these influences is knowing when Brent crude finally falls back to more sustainable levels."

PALM OIL OUTPUT GROWTH PROSPECTS

"2012 output is now benefiting from the good rains in most regions in 2011 and early this year, but there is still a legacy of dry conditions in a couple of Indonesian regions."

"Since oil palms take three years to start producing and eight years to reach peak output, we can expect a rising wave of Indonesian palm oil output."

DORAB MISTRY, HEAD OF TRADING, GODREJ

PRICE FORECAST

"My short term forecast for crude palm oil prices is a level of 2,200 ringgit on the Bursa Malaysia Derivatives third month sometime in the next four to six weeks."

"Prices must enable energy demand to kick in and for vast tonnages to be contracted and shipped out. In the New Year we could look at higher prices."

CHANCE OF IMPORT DUTY IN INDIA

"I have also been asked about the chances of India imposing an import duty on crude palm oil and raising the import duty on refined palm oil and RBD Olein. I believe this will happen but not immediately. Indian domestic prices for soybeans have fallen and farmers are not happy."

"However, the Indian government will wait until local inflation numbers turn lower. This will happen soon because the rupee has got stronger and commodity prices have fallen. Once inflation numbers are lower, the government will be in strong position to give some small protection to oilseed farmers."

ANTI-DUMPING DUTY ON BIODIESEL EXPORTS

"The current anti-dumping inquiry launched by the EU in the case of biodiesel exporters from Indonesia and from Argentina will take about a year to complete."

"At the end, if the EU finds a case for levying an anti- dumping duty, it can be levied with retrospective effect. Therefore, it will remain a cloud overhanging the use of palm products in biodiesel for export."

CRUDE PALM OIL OUTPUT

"Malaysian production will peak in October, it is generally expected that Indonesia will enjoy an extended double peak, that is October and November."

"My expectation is that Malaysia will produce 18 to 18.2 million tonnes of crude palm oil in 2012. I confirm Indonesian crude palm oil production looks like it is exceeding 27.5 million tonnes this year."

ENERGY DEMAND KICKING IN

"At that price level, $749 CIF Rotterdam or Bursa Malaysia Derivatives at 2,200 Ringgits on the 3rd position, palm will be so competitive that energy demand will come back strongly.

"Palm oil will be competitive for blending into fuel for electricity generation. Palm biodiesel will also be super competitive and will go for discretionary blending without requiring a mandate or any subsidy. This is the way stocks can be reduced within three months."

CURRENT FUNDAMENTALS AND EXPORT TAXES

"Given the current fundamentals, Bursa Malaysia futures on the 3rd position should be at 2,200 ringgit. CPO CIF Rotterdam should be US$ 749."

"Malaysia should immediately remove all export taxes and export quotas. Malaysian refiners will be very competitive and will be able to work at full capacity. With zero export duty, palm exports will expand. At this level, the Indonesian export tax also becomes nil."

"Indonesian growers and millers will actually be better off than at present. Malaysia and Indonesia will enjoy a level playing field. With better infrastructure and more efficient ports, there is no doubt Malaysia will win a greater share of the export business. It is a win-win situation for all."

PALM OIL STOCKS

"It now appears fairly certain that Malaysian palm oil stocks will reach or exceed 3 million tonnes on January 1 2013. If prices are held artificially high, it will be counter-productive and stocks on 1st January could be much higher and could remain at 3 million tonnes until March 1 2013."

"The recent difficulty in boosting exports must serve as a warning. Malaysia and Indonesia began a major export push from August onwards.

"The result is high stocks and full pipelines in all destination markets. Even India, which was the best performing market until last month, is now suffering acutely from high priced heavy inventory and a lack of storage. "

THOMAS MIELKE, EDITOR, OILWORLD

PRODUCTION OF OILSEEDS

"Production of the ten oils and fats will not increase for the first time in 20 years. For the new season, we are going see a slight decline in the total crushings of oilseed."

"World production of seed oils to decline in 12 months. Palm oil has to fill part of this demand. Palm oil is in the situation to do this."

"For 2012, Indonesian production is expected to hit 26 million tonnes. Malaysian production is seen at 18.5 million tonnes for the same year.

"Indonesia's production will increase by 2.0 million tonnes, while Malaysia production will be lower by 0.4 million tonnes from a year ago. Total production in this calendar year is 52 million tonnes worldwide."

SHIFT IN DEMAND TO PALM OIL

"World production of all other oilseeds except soybean is declining this season by 5 million tonnes in contrast to a 10 million tonnes increase in last season. It will force a decline in crushing -- by a combined 3.5 million tonnes."

"Palm oil will fill some of this supply gap. I am of the opinion that palm oil prices are undervalued and present a good buying opportunity."

PALM OIL PRICES

"I see palm oil undervalued for several reasons. Palm oil stocks are at a record high in Indonesia and Malaysia, and have are totally discounted in prices. There are indications that palm oil has started to recover in the second week of October."

"What is most striking is the RBD palm olein's discount to soyoil $250 per tonne. This is unsustainable. Palm oil prices in Rotterdam CIF have for a time fallen below Brent crude oil, about $10-15 per tonne. I believe consumers will take advantage of the current, attractive prices. Exporters are ready sellers owing to the currently large stocks."

Malaysia palm stocks to fall as low prices, tax cuts lure energy demand- RTRS

KUALA LUMPUR, Oct 16 (Reuters) - Record stocks of palm oil in No.2 producer Malaysia could fall if prices 0#FCPO: drop further, stepping up demand from the biofuel industry at a time when Brent crude remains well above $110 per barrel, analysts at an industry meeting said.

Palm oil prices have fallen by a fifth since the start of the year as weak fundamentals, aided by bleak global economic prospects, weighed on sentiment.

But they could drop from 2,465 ringgit ($810) per tonne now as stockpiles could reach as much as 3 million tonnes by the start of 2013, swelled by strong output and slowing exports, the analysts said in the Malaysian capital on Tuesday.

Food demand for Malaysia's palm oil has slowed because top buyers India and China have built up large stocks of imported oils, they said. Malaysian refiners are also losing business to Indonesian rivals who offer cheaper cargoes after Jakarta cut taxes on the grade last year.

But help for exports could also come from a plan by Malaysia to remove a quota on shipments of tax-free crude palm oil and cut export duties by January 2013 to help refiners become more competitive, the analysts said.

"This, together with the emergence of price-sensitive biofuel demand, should stop stocks rising from December, pulling up the premium for palm oil over Brent crude," James Fry, head of commodities consultancy LMC International, told a palm oil trade seminar.

Rising prices of Brent crude oil LCOc1, which rose above $116 on Tuesday, driven by Western sanctions on Iran and its nuclear programme, could burnish the appeal of biodiesel, although Fry says current levels of crude oil are not very sustainable, given slowing global economic growth. O/R

Fry's view on stocks were shared by Dorab Mistry, head of edible oil trading with Indian conglomerate Godrej International, who said Malaysian palm oil futures should fall to 2,200 ringgit in the next 4 to 6 weeks to reflect fundamentals and a draw in energy demand.

Palm oil could then be competitive for blending into fuel for electricity generation or biodiesel, and within three months potentially reduce Malaysian stocks from a record of 2.48 million tonnes hit in September, he said.

"If prices are held artificially high, it will be counter-productive and stocks on Jan. 1 could be much higher and could remain at 3 million tonnes until March 1, 2013," Mistry said.

Oil World sees growing dependency on palm oil - RTRS

AMSTERDAM, Oct 16 (Reuters) - Sizeable declines in world export supplies of sunflower oil, rapeseed oil and soybean oil will raise the global dependence on palm oil this year, analyst Oil World said on Tuesday.

German-based Oil World said it expects an increase in palm oil exports in 2012/13. Palm oil exports declined in the period from April to September this year leading to record high stocks in the world's number 2 producer Malaysia.

"But the prospective sizeable decline in world exports of sunflower, rapeseed, and soy oils by a combined 1.1 million tonnes will contribute to a demand shift in favour of palm oil," Oil World said.

"The current unusually large price discounts of crude and processed palm oils relative to other vegetable oils and tallow will stimulate a demand shift in favour of palm oil."

Palm oil in Europe's vegetable oils market has lost 20 percent since January this year, mostly due to poor economic growth, record stocks in Malaysia, and good output from both Indonesia and Malaysia which together account for 90 percent of global palm oil supplies.

The gap between palm oil and more expensive soyoil widened to $334 in October from $145 in January. Palm oil's discount to rape oil more than doubled to $371 from $144 in January.

"The current attractive palm oil prices give an incentive to switch already now," said Oil World.

"However, the approaching wintry conditions in the consuming areas of the northern hemisphere are partly seen as a limiting factor for palm oil." Palm oil thickens at lower temeperatures and is not suitable for biodiesel use in colder weather

Oil World said palm oil will account for 55.1 percent of the global vegetable oils production in the period from July to December 2012.

Global vegetable oils consumption is seen growing at a lower pace due to slowdown in biodiesel production, Oil World said.

Trader's Highlight

DJI- NEW YORK, Oct 16 (Reuters) - World shares rose for a second day on Tuesday and the euro gained against the U.S. dollar as concern over U.S. corporate earnings eased and German economic data improved.

The euro jumped near $1.31 after market hours in New York to its highest since September 18 after rating agency Moody's affirmed its investment grade sovereign rating on Spain. Markets had feared that a downgrade could have forced some holders of Spanish debt to sell, further lifting Madrid's borrowing costs.

Reports that Spain may be close to seeking a bailout and that Greece may receive more financial aid stoked investors' appetite for riskier assets, with European shares closing up more than 1.0 percent, led by financial stocks.

U.S. stocks rose after stronger-than-expected earnings from big-name companies. Johnson & Johnson and UnitedHealth Group both increased their full-year profit forecasts while Goldman Sachs raised its dividend.

"One of the biggest things coming into this earnings reporting season was this drum beat for how bad it was going to be," said Art Hogan, managing director of Lazard Capital Markets in New York.

"We've got a chance to get some of that back because the worst-case scenario is not playing out."

The Dow Jones industrial average .DJI rose 127.55 points, or 0.95 percent, to 13,551.78. The S&P 500 .SPX gained 14.79 points, or 1.03 percent, to 1,454.92. The Nasdaq Composite .IXIC added 36.99 points, or 1.21 percent, to 3,101.17.

NYMEX- NEW YORK, Oct 16 (Reuters) - U.S. crude futures edged higher on Tuesday supported by an equities rally on Wall Street and a weaker dollar, while expectations that U.S. crude stocks rose last week and concerns about global economic growth limited gains.

 

CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade ended firm on bargain-buying after a two-day sell-off and talk of export demand from China, but the market pared gains by the close.

* USDA confirmed sales of 110,150 tonnes of U.S. soybeans to unknown destinations for delivery in 2012/13.

• Gains limited by a lack of fresh news and concerns about prospects for a large South American soybean crop.

• Rainfall through the last two days in southern Argentina should buoy prospects for seedings of the 2013 corn and soybean crops, while Brazil was expected to receive crop-friendly rains this week including the drier areas of northeastern Brazil.

• Soyoil gained against soymeal as meal/oil spreads unwound.

• Cash soybean basis bids were steady to firm in the interior U.S. Midwest, and soymeal basis offers also had a firm tone amid tight supplies of soybeans as the harvest entered the home stretch. (Full Story)

• USDA late Monday said the U.S. soybean harvest was 71 percent finished, up from 58 percent the previous week and ahead of the five-year average of 58 percent. US/SOY

• Sizeable declines in world export supplies of sunflower oil, rapeseed oil and soybean oil will raise the global dependence on palm oil this year - analyst Oil World.

FCPO- KUALA LUMPUR, Oct 16 (Reuters) - Malaysian palm oil futures ended slightly lower on Tuesday after top industry analysts projected weaker prices and as investors digested news that export tax cuts will only take effect next year.

Palm oil prices have fallen by a fifth since the start of the year, but they could drop further as stockpiles could reach as much as 3 million tonnes by the start of 2013, swollen by strong output and slowing exports, analysts said.

Adding to concerns over rising stocks was the government's decision to implement palm oil export tax cut only in January.

"The market is still trying to get a grip on how big stocks can get in Malaysia, as well as digesting news that the export taxes are not going to come through until early January," said ANZ agricultural commodity strategist Victor Thianpiriya.

"In the short term, this will probably depress prices a little bit, as consumers would prefer to wait until January and potentially source from Indonesia to bridge that gap."

At the close, the benchmark January contract FCPOc3 on the Bursa Malaysia Derivatives Exchange fell 0.2 percent to 2,466 ringgit ($808) per tonne.

Total traded volumes stood at 40,889 lots of 25 tonnes each, much higher than the usual 25,000 lots.

REGIONAL EQUITY- BANGKOK, Oct 16 (Reuters) - Southeast Asian stock markets ended mostly higher on Tuesday as steadier global stock markets bolstered bargain hunting in recently battered blue chips such as Indonesia's Astra International Tbk ASII.JK and Philippines' PLDT TEL.PS.

Jakarta's Composite Index .JKSE edged up 0.36 percent at 4,329.07, its all-time closing high. The biggest listed company Astra International rose 2.6 percent, halting a four-day fall.

The Philippine main index .PSI gained 0.31 percent to 5,399.94, the highest close in more than one week. Manila's biggest firm by value Philippine Long Distance Telephone Co TEL.PS rose 0.7 percent after Monday's 1 percent drop.

The Ho Chi Minh Stock Exchange's VN Index .VNI climbed nearly 2 percent to a one-month closing high of 399.22, with market sentiment lifted after Vietnam's ruling Communist Party promised economic reforms.

Investors preferred blue chips that are due to release good earnings in the coming reporting season, brokers said. In Bangkok, state run Krung Thai Bank Pcl KTB.BK rose 2.2 percent, outperforming the SET index .SETI which fell 0.2 percent.

Broker Phillip Securities said it expects Krung Thai Bank to post a July-September net profit of 7.26 billion baht ($236.67 million) versus last year's 5.5 billion baht.