Palm oil prices seen bearish on higher output in 2018: Oil World


The benchmark third month crude palm oil contract on Bursa Malaysia should not go below MR2,300/mt or $588.84/mt until June as CPO production may increase to 20.76 million mt in Malaysia in 2018 and 38.80 million mt in Indonesia, Thomas Mielke of Oil World said Wednesday at the Price Outlook Conference or POC 2018.

Mielke was flat to bearish on the prospects for palm oil prices in 2018, as palm-oil production begins to rebound almost two years after a debilitating El Nino of 2016.

World production of palm oil was predicted to be as high as 70.84 million mt in 2018 from 67.87 million mt in 2017.

Mielke said he expected worldwide stocks of 17 oils and fats to increase to 13.2% of production in 2017-18 from 12.5% in 2016-17.

However, demand for palm oil was expected to follow a long-term growth trend and the excess palm oil stocks of 2018 could be a temporary state of affairs, he added.

Meanwhile, the Argentine drought and the state of the Argentine soybean crop, which could be expected to lose around 12 million mt of production, according to Mielke, is sending bullish signals on soybean prices and derivatives.

The expected fall in soybean production was compounded by a "severe protein shortage" in the soybean meal due to inferior-quality beans, he added, which had reduced margins for the soybean crush.

Mielke said he expected the spread between soybean oil and palm oil to widen, as palm oil prices would be bearish, while soybean oil prices were expected to be bullish.


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