DORAB MISTRY, DIRECTOR, GODREJ
INTERNATIONAL PRICE OUTLOOK
- "The world economy faces
challenging times in 2013. The biggest new factor is the emergence of the
U.S. as a major crude oil producer. This is a game changer for energy
prices."
- "One cannot be bullish on
energy prices. This has a direct effect on the biggest bullish factor for
palm oil -– biodiesel."
- Expects the third-month palm
futures contract to trade at 2,300-2,500 ringgit per tonne from now until
end-April, and warns that trading may become more volatile in the event
elections are called in Malaysia during this period.
- Expects prices to decline to
2,200 ringgit or lower from mid-April.
- Sees July to August as a
critica for the market, and the August USDA report on U.S. crop estimates
could be a watershed. Prices may fall at this stage as the low production
cycle is ending and the market looks to rapidly expand production.
- Does not expect futures to
decline below 1,800 ringgit unless Brent crude declines to $80 per barrel.
- "As prices decline below
2,000 ringgit, plantations will begin to reduce fertiliser usage and
harvest rounds will get longer. These should keep prices from falling
further."
- Says price forecast is based on
assumption that Brent crude will trade in a band between $90-110 per
barrel, a relatively strong U.S. dollar and normal weather conditions.
- Threats to price forecast
include backtracking on biodiesel mandates by the U.S. or withdrawal of
the $1 per gallon blending credit.
INDIA
- Says India is going to harvest
record rapeseed crop and a big wheat crop.
- Says both Malaysian and
Indonesian exporters have been chanelling crude palm oil and palm olein
into India, which has meant that prices of locally produced oils have
fallen steadily. India is carrying record stocks of imported oils as well
as record stocks of domestic oilseeds.
- Estimates current Indian stocks
of all oils –- imported as well as domestic -- at almost 2 million tonnes,
up 80 percent from March last year.
- "India's imports of edible
and non-edible oils during the oil year November 2012 to October 2013 will
also break all records."
- Says India to import 8.55
million tonnes of palm oil in the oil year of November 2012 to October
2013.
- "The recent statement in
the Economic Survey of India released on Feb. 26 clearly states the
intention of the Indian government to support prices of domestic oilseeds
and oils, using the instrument of import duties."
- Expects the Indian government
to revise the import duty on unrefined oil to 10 percent and on refined
oil to 17.5 percent in April or latest May.
- Expects that by August to
September, the import duty on unrefined oil will be further hiked to 20
percent and on refined oil to 27.5 percent.
INCREMENTAL SUPPLY/DEMAND
- Says palm oil's high production
cycle extended further than initially thought and only ended in January.
Expects low production cycle that begins in February to be shorter than
previous cases due to better weather and should end around September.
- Estimates Malaysia's crude palm
oil production at between 19.5 and 19.7 million tonnes in 2013. This is
partly due to higher than expected acreage reaching maturity.
- Estimates Indonesian production
of crude palm oil will top 30.5 million tonnes in 2013, a 9 percent
increase from last year's 28 million tonnes.
- Says strong expansion of mature
acreage in Thailand, Central America, Colombia and parts of Africa will
lead to an extra 700,000 tonnes of crude palm oil in 2013, bringing global
incremental supply to 3.9 million tonnes.
- Believes export taxes will soon
become irrelevant because prices will be below threshold levels.
- "What interests me more is
the anti-dumping duty that the EU is likely to impose on Indonesian palm
methyl ester at some stage in 2013 but with retrospective effect from
2012."
- Says India will produce an
extra 500,000 tonnes of rapeseed oil in the next 12 months.
- "The biggest supply
response is being seen in soybeans. South America is now on course to
produce about 140 million tonnes of soybeans in 2013. This is almost 30
million tonnes more than 2012."
- Expects global food demand to
grow by 3.5 million tonnes due to lower prices and biodiesel demand
worldwide to expand by about one million tonnes, leading to an incremental
demand of about 4.5 million tonnes.
- Says incremental supply seen at
4.35 million tonnes.
- "We can see that
incremental supply and demand are broadly in balance this year."
- Says post-September there will
be large supplies of soybeans, sunflower seeds and even palm oil which
will be entering a new biological high cycle. The oil year 2012/13 should
also see the heaviest carry-over stocks in history.
- "Therefore the outlook
further forward, given normal weather, is bearish."
