Palm oil prices expected to dip before recovering

PETALING JAYA: VEGETABLE oil traders forecast palm oil prices will dip below RM2,250 a tonne before climbing back to RM2,700 by year-end.

A technical analyst with CIMB Futures Teoh Ghim Meng thinks the market may have yet to fully factor in bearish news of high stocks level. On the longer term, however, he said he is bullishly biased. 

"Prices may dip as low as RM2,230 a tonne. We need to ask ourselves how much of the bearish news of high stocks have already been factored in.

"As palm oil shipments to China pick up in preparation for the Lunar New Year, prices are likely to re-test the RM2,600 to RM2,650 level again," he said.

Last Friday, the third-month benchmark palm oil futures on Bursa Malaysia Derivatives traded RM41 lower to close at RM2,469 a tonne.

Teoh, a renowned vegetable oils trader with 34 years experience in the derivatives market, was speaking to Business Times at the Palm Oil Refiners Association of Malaysia's annual dinner held here over the weekend. 

Among the 1,000-odd vegetable oils traders at the gathering was OSK Investment Bank vice president of futures and options Ryan Long. 

He, too, expects palm oil prices to dip below RM2,250 a tonne in the immediate term as freshly-pressed crude palm oil continue to fill up the storage tanks all over the country.

It was reported that China's palm oil purchase may amount to 5.7 million tonnes this year because recent price decline had spurred more demand for the staple cooking ingredient.

"We expect Malaysia's October exports to be higher than September as India and China are raising their orders," he said.

Over in India, Godrej International Ltd trader Dorab Mistry said a stronger US dollar will lead to lower commodity prices in 2013 unless a big weather disturbance emerges. 

"I also believe the cyclical bull market in commodities has come to an end," he said in his vegetable oils outlook at the India's Central Organisation for Oil Industry & Trade convention held in New Delhi yesterday evening.

"The production of commodities will be profitable but there will be no super-profits except occasionally," he added.