Palm oil prices could fall 13 pct by Jan 2014 as output surges-Mistry

Reuters

* Rising bio fuel demand to be fed by increased production

* Contrarian view to leading analyst Fry who sees pricerises

* Indian refiners pushing for imports of alternatives

By Rajendra Jadhav

MUMBAI, Sept 22 (Reuters) - Increasing demand from the biofuel industry is unlikely to take crude palm oil (CPO) pricesout of a 2,200-2,400 ringgit range in the next few weeks andthere are chances prices could hit a four-year low of 2,000ringgit in January 2014 if Brent crude drops below $100 perbarrel, prominent industry analyst Dorab Mistry said on Sunday.

Crude palm oil is being used increasingly as an additive infossil fuels, as it can cut costs and reduce environmentallydamaging emissions. But production is also rising as farmers intop producers Indonesia and Malaysia plant more of the crop.

Global palm oil production in the vegetable oil yearstarting from Oct. 1, 2013, is set to rise by 3.5 million tonnesover the current year, Mistry, who is head of vegetable oiltrading with Indian conglomerate Godrej Industries,told the Globoil India conference.

Global demand for palm oil from the bio fuel industry islikely to rise by 2 to 2.5 million tonnes, while demand from the food industry could rise by 3 million tonnes, he said.

"Despite the expansion of demand due to bio fuels, I do notexpect a bull market," Mistry said in a speech at the GloboilIndia conference.

Rising demand from the biofuel industry could keep crudepalm oil (CPO) prices in a narrow range of 2,200 to2,400 ringgit in the short term, Mistry said.

But by January 2014, they could fall 13 percent from currentlevels to 2,000 ringgit, if Brent crude falls below $100 perbarrel and prospects of a bumper soy crop in South Americasurface.

A contrarian view was put forward on Saturday by James Fry,chairman of commodities consultancy LMC International, who saidCPO prices may rise nearly 9 percent to 2,500 ringgit per tonneby February 2014 from current levels as Indonesia's inventorieswill fall now it has decided to promote biodiesel consumption.

On Friday, benchmark palm oil futures on the Bursa MalaysiaDerivatives Exchange had lost 0.9 percent to close at 2,297ringgit per tonne, bringing prices down 6 percent so far in2013, after a plunge of 23 percent in 2012.

"The fundamentals of the oilseed and vegetable oils complexare clearly bearish. They can turn bullish only with a majorweather problem," Mistry said, as the peak palm oil productionseason comes in the next few months and bumper output of soybeanand sunflower is expected.

Oil palm trees in Indonesia and Malaysia - the world's topproducers that make up about 90 percent of global palm oilsupply - typically produce more fruit in the second half of theyear after resting in the first half.

Mistry lowered his figures for palm oil output in Malaysiaand Indonesia by about 2 percent and 3.3 percent respectivelyfor the calendar year 2013 as the start of the higher productioncycle was delayed.

But he expects a consistent rise in inventories in Malaysiaand Indonesia for the next several months from September.

India, the world's biggest importer of palm oil, could seedemand stagnating as local buyers turn to soy oil and sunfloweroil alternatives to supply domestic refiners who cannot competeon refined palm oil with cheap exports from producing countries.

In the 2013/14 edible oil year starting from Nov. 1, 2013,Mistry estimates India's imports of palm oil at 8.3 milliontonnes, compared with 8.35 million tonnes in 2012/13.

"Indian refiners are the gate-keepers to the Indian market.They determine which oil is to be imported and processed. Ifthey face competition from processed and refined palm oilimports, will they import more palm or will they import moreunrefined soft oils?"

India's vegetable oil production in 2013/14 is likely torise by at least 500,000 tonnes from this year, he said. (Editing by Jo Winterbottom and Robert Birsel)

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