Source: Godrej International Research
* World supply of rapeseed oil in 2015-2016 falls by almost 1.2 million tonnes, but that shortfall is made up by releases by China from its State Revenue
Price outlook
These are my assumptions [as at March 9]:
We must now cast aside all ideas of CPO futures at RM2,600 or RM2,700 Ringgit. We have to take prices to levels where demand does not expand and is made to shrink somewhat in price-sensitive markets like India. That will be mean BMD futures trading with a 3 rather than a 2.
What happened to prices in the El Nino of 1997-98? CPO futures rose from US$500 in January 1998 to a peak of US$700 in June; and having accomplished the mission of rationing demand, this ended the year at US$550.
I had earlier forecast that soybean oil futures on the CBOT will rise to 33 cents and this was fulfilled. I believe that rise was too quick and inevitably those gains were given up very soon. I expect soybean oil futures to climb once again, which may even lead to higher prices for beans. I believe cash soybean oil FOB Argentina will reach US$800 FOB.
It is possible that for a short time, RBD palm olein FOB and crude soybean oil FOB will be very close in price. Sunflower oil prices will keep a premium over soybean oil. Rapeseed oil prices will trade at par with soybean oil. I expect palm kernel oil to trade in a range of US$1,100 and US$1,200 CIF Rotterdam. Coconut oil will gradually increase its premium over CPKO.
The industry in most parts of the world is in good shape. Food demand is robust and we can look forward to better times. Soon we shall have to track the planting weather in North America. After five back-to-back bumper soybean harvests (three in South America and two in North America) can we confidently expect a sixth bumper crop? And if that does not happen, will it prolong this current bull market?
Dorab E Mistry
Director, Godrej International Limited
This is an edited version of a paper delivered at the Palm & Lauric Oils Conference Price Outlook 2016 in Kuala Lumpur in March.
