Presentation on theme: "Outlook for World Vegoil prices"— Presentation transcript:
1 Outlook for World Vegoil prices By Dorab E MistryGodrej International Limited
2 Full Title of my paper Outlook for World Vegetable Oil Prices 7th China International Oils &Oilseeds ConferenceGuangzhou
3 Congrats to DCE & BMDThe importance of CHINA and of DCE keeps rising each yearOne month ago Malaysia announced New Export Tax StructureIs it a Game Changer?Palm is pricing itself out of Energy Demand
4 US Presidential Election Whoever wins, a Grand Bargain between both sides will be struck and the Fiscal Cliff will be avoidedDollar will get strongerMood of optimism and Equities will rallyCommodities will be weak
5 Palm oilMy humble recent suggestion: Let BMD futures on 3rd position fall to 2200 RinggitsThe Phantom in the BMD will not let it happen – keeps futures 2500 to 2600Can Malaysia do without any CPO exports?From January 2013 will Malaysia export any CPO?
6 Palm oilBMD price should be Indonesian Export Price MINUS Malaysian Export TaxAt present levels Malaysian CPO is not competitive3rd month BMD futures are the costliest CPO in the worldWill lead to big CPO imports into Malaysia
7 Palm oilRestrictions on RBD Olein imports into China from January 2013China will become a CPO market like IndiaEnergy prices are slidingPalm needs to be more competitive – forget the discount to soya oil. Maximum substitution has already taken place
8 Palm oil Harvesting and Production are being extended and postponed Latest estimate: Malaysia 18.4 million mt and Indonesia 27.5 million tonnesMalaysian stocks on 1st Jan 2012 will be at least 3 million tonnes and if no CPO exports from Jan, stocks will not decline
9 Other oilsSoybeans may only need to go to US$ 16 per bushel. Will China State Reserve release 2 million beans between now and March?Sun oil will be at a premium to soya oil. Soya oil demand is weakRape oil will be a premium oilLaurics outlook Bleak
10 Incremental S&DMy big mistake in over-estimating veg oil usage in bio diesel inExpected Demand Growth of 3 million tonnesActually Demand SHRUNK by 2 million tonnesForecast of 4000 Ringgits was abandoned
12 Incremental S&Ds 2011-12 Supply Up 5,900 Demand Up 1,500 Food Demand up 3 to 3.5 mln mtBio diesel demand DOWN 2 mln mt
13 So where is the 4.4 million mt surplus? Hidden in Indonesian Stocks and high Malaysian stocksWe are starting with Heaviest Stocks in historyNew S&Ds for will be released at IPOC in Bali on 30 November
14 Price OutlookPalm : BMD CPO futures on 3rd month must fall to 2200 Ringgits in next few weeks.We need Low Prices for 2 months to clear stocksSome Short Term Pain for Good Long Term Gain
15 Conclusion Cyclical Commodity Bull Market over Many Ag prices are close to production cost. Palm at 2200 Ringgits is still very profitable. Consumers deserve some respiteThank You to DCE and BMDBest Wishes to CHINA’s New Administration – Good Luck & God Bless
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