The edible oil market will go through a period of ‘great’ volatility, first down and then ‘gradually up’, according to Mr Dorab Mistry, Director, Godrej International Ltd.
“The delicate economic situation in the developed world and the proliferation of what Warren Buffet has called ‘weapons of mass financial destruction’ leads me to believe there will be several short periods between now and the middle of 2012 when markets will be extremely volatile,” said Mr Mistry at a presentation on Global Vegetable Oil Price Outlook at ‘Globoil’ conference during the weekend.
Mr Mistry is one of the industrial leaders whose projections on vegetable oils price is eagerly watched by key players in the industry, exporters and importers.
The volatility will be such that people could tend to forget fundamentals and look only at the performance of financial markets and equities. Risk is high so that commodity and asset prices could course as the dollar weakens. But there is also the risk of a financial or stock-market collapse that could strengthen the dollar as the least bad currency.
Projecting crude oil to trade in the range of $85-105 a barrel, Mr Mistry said that crude palm oil (CPO) on Bursa Malaysia Derivatives Exchange would range between 2,800 Malaysian ringgit (MYR) and 3,100 MYR in the next 5-8 weeks. Malaysian palm oil production should be good in the next 6-8 weeks and there could be a bumper output. CPO prices could see some recovery from December onwards but the pace of the recovery will depend on the strength of economies of the developing world.
With soyabean oil prices ruling steady at $1,200-1,250 a tonne f.o.b, export demand for the oil has dropped due to the large discount that RBD (refined, bleached, deodorised) palmolein enjoys. “The erosion of demand, mainly in India and other price sensitive markets, will continue,” he said, adding that prices could rule steady around this level for the next several months.
Sunflower seed production in the Black Sea region, mainly Ukraine, could put pressure on soyabean oil. At least until January, sunflower oil could trade at discount to soyabean oil. But if any problem arises with rainfall in Argentina, then sunflower oil will regain its premium status.
Rapeseed oil is likely to remain at a premium to sunflower oil, while palm kernel oil is likely to drop to $1,150 levels before recovering to $1,500 by June.
Dwelling on the Indian scenario, Mr Mistry said that vegetable oil imports this season ending October would drop to 8.8 million tonnes mainly due to higher domestic oilseeds production. Edible oil consumption will keep rising next year too, and imports would be significantly higher.