Mielke sees prices rising to RM3,300


KUALA LUMPUR: THE reception at the Palm Oil Trade Fair and Seminar (POTS) 2012, here, was lukewarm as the vegetable oil analysts gave moderate views on how palm oil prices will fare in the months ahead.

As some 800-odd participants settled in at the grand ballroom of a hotel here, Hamburg-based ISTA Mielke GmbH executive director Thomas Mielke lifted the mood in the hall when he said consumers around the world are becoming more dependent on palm oil due to insufficient production of other oils and fats.

He went on to say that he expects global demand for palm oil to pick up as the wide discount to soya oil, of more than US$300 (RM918) per tonne, is not sustainable. "We are going to see more global demand shifting to palm oil as there is considerable shortage in soft oils," he said.

Seven months ago, at the Palm and Lauric Oils Conference & Exhibition: Price Outlook 2012/2013 (POC 2012), Mielke predicted that Malaysia's palm oil supply would hit a record high of 19.3 million tonnes. Yesterday, however, he trimmed his forecast to 18.5 million tonnes, two per cent less than last year's 18.9 million tonnes. 

As for Indonesia, he maintained his forecast that output will expand to 25.5 million tonnes.


Mielke, who is also editor of Oil World journal, stressed that the oil-palm industry must continue its focus on yield improvement as a way to overcome limitations of arable land and water, so as to retain world market leadership.

"I think palm oil output will not be enough to offset shortage in soya and rape seed oils," he said.

Mielke, a well-respected and authoritative vegetable oil analyst, once again rejected calls by green activists for a moratorium on oil palm plantings. "In order to satisfy the daily oils and fats needs of a growing world population, farmers need to speed up on their oil palm plantings. The world continues to face shortage of edible oils," he added.


Yesterday, the third month benchmark palm oil futures on the Malaysian Derivatives Exchange fell RM4 to close at RM2,466 per tonne.

In conclusion, Mielke said palm oil price, "which is only likely to bottom out at the end of the year, is likely to rise to RM3,300 per tonne towards the second quarter of 2013, as palm oil needs to fill up the shortage of soft oils in the world".

Jupiter Securities chief market strategist Benny Lee Wan Yu, who was bullish on palm oil prices last month, moderated his forecast this time. As he took the stage, he said palm oil is currently oversold. While he cautioned that palm oil could settle further to RM2,230 per tonne, he decided to maintain a positive outlook that prices are likely to rebound to between RM2,650 and RM2,800 per tonne by the end of the year.


LMC International Ltd chairman Dr James Fry was next to present his opinions. He reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices. 

"When vegetable oil prices approach that of petroleum, biodiesel production and direct burning of vegetable oils become increasingly attractive options. This creates a floor price," he said.

Fry, while refraining from giving a price forecast, anticipated that some of Malaysia's 2.5 million tonnes of palm oil stocks will level off in two months as biodiesel consumption picks up.

Malaysia's Plantation Industries and Commodities Minister Tan Sri Bernard Dompok had announced that the government will, from January onwards, adopt a flexible crude palm oil (CPO) export tax structure that mimics that of Indonesia's and, at the same time, also abolish duty-free CPO export quota.

Godrej International director Dorab Mistry struck a sobering chord among the audience when he said the new palm oil tax regime will not clear away high inventories at Malaysia's refineries and mills. "The current situation is brought on by strong production, flat demand and collapsing biodiesel consumption. To reduce stocks, Malaysia must endure short-term pain to enjoy long-term gain. The cure for low prices is lower prices," he said.

In calling himself a lifelong friend of the Malaysian palm oil industry, Dorab said Malaysia should remove all palm oil taxes and quotas so that palm oil prices can begin to stimulate robust demand at a lower level of RM2,200 per tonne. At this level, which Dorab said is not oppressive, planters can still make decent profits.