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Outlook for World Vegoil prices By Dorab E Mistry Godrej International Limited.

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Presentation on theme: "Outlook for World Vegoil prices By Dorab E Mistry Godrej International Limited."— Presentation transcript:

1 Outlook for World Vegoil prices By Dorab E Mistry Godrej International Limited

2 Full Title of my paper Outlook for World Vegetable Oil Prices 7th China International Oils & Oilseeds Conference Guangzhou

3 Congrats to DCE & BMD The importance of CHINA and of DCE keeps rising each year One month ago Malaysia announced New Export Tax Structure Is 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 avoided Dollar will get stronger Mood of optimism and Equities will rally Commodities will be weak

5 Palm oil My humble recent suggestion: Let BMD futures on 3 rd position fall to 2200 Ringgits The Phantom in the BMD will not let it happen – keeps futures 2500 to 2600 Can Malaysia do without any CPO exports? From January 2013 will Malaysia export any CPO?

6 Palm oil BMD price should be Indonesian Export Price MINUS Malaysian Export Tax At present levels Malaysian CPO is not competitive 3 rd month BMD futures are the costliest CPO in the world Will lead to big CPO imports into Malaysia

7 Palm oil Restrictions on RBD Olein imports into China from January 2013 China will become a CPO market like India Energy prices are sliding Palm 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 tonnes Malaysian stocks on 1 st Jan 2012 will be at least 3 million tonnes and if no CPO exports from Jan, stocks will not decline

9 Other oils Soybeans 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 weak Rape oil will be a premium oil Laurics outlook Bleak

10 Incremental S&D My big mistake in over-estimating veg oil usage in bio diesel in Expected Demand Growth of 3 million tonnes Actually Demand SHRUNK by 2 million tonnes Forecast of 4000 Ringgits was abandoned

11 Expected Actual Soya oil Rape oil Sun oil + 1, ,100 Gn & Cotton Palm + 2, ,500 Total supply + 5, ,900 Incremental Supply

12 Incremental S&Ds Supply Up 5,900 Demand Up 1,500 Food Demand up 3 to 3.5 mln mt Bio diesel demand DOWN 2 mln mt

13 So where is the 4.4 million mt surplus? Hidden in Indonesian Stocks and high Malaysian stocks We are starting with Heaviest Stocks in history New S&Ds for will be released at IPOC in Bali on 30 November

14 Price Outlook Palm : BMD CPO futures on 3 rd month must fall to 2200 Ringgits in next few weeks. We need Low Prices for 2 months to clear stocks Some 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 respite Thank You to DCE and BMD Best Wishes to CHINAs New Administration – Good Luck & God Bless


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