Business Times

Tuesday, August 26, 2008

By Ooi Tee Ching

THE palm oil price is taking a breather due to a peak harvest season but will resume their rise as demand picks up, industry experts said.

Yesterday, the third month benchmark crude palm oil price on the Malaysian Derivatives Exchange fell RM115 to close at RM2,600 per tonne.

“The market is oversold and I would say we’re in transition. I may be mistaken but I’m convinced the bull run is not yet over. We still have a couple of years more to go,” said Godrej International Ltd director Dorab Mistry.

Changing weather patterns could also affect yields of soyabean in the US and grains in India.

“The US Department of Agriculture had over-estimated August rainfall in the US and there is still a question mark on the soya-bean yield,” he said.

If the production of soyabean falls, its prices could rise. This in turn, could also boost the palm oil price as both are a near perfect substitutes. Both are used to make cooking oil, margarine, detergent and cosmetics.

“These development are giving support to palm oil prices,” he told a hall full of more than 500 participants at the International Palm Oil Trade Fair and Seminar 2008 held in Kuala Lumpur yesterday.

In a separate session, the Palm Oil Refiners Association of Malaysia (Poram) told reporters that defaults of palm oil shipments to India and China are not massive. At most, it is only around 80,000 tonnes.

The trade body said recent news reports of exaggerated defaults has cause unnecessary panic and further price plunge in the palm oil futures market.

“Certainly, there are some defaults. I’ve checked with all our members and we find that it is not to the extent of 800,000 or one million tonnes … that is impossible,” said Poram acting chairman Yong Chin Fatt.

Defaults occur when buyers do not want to honour a contract when prices fall too much too fast and vice versa for sellers.

In today’s context, Yong said Malaysia’s palm oil trading with India or China is already quite established and developed.

“We sometimes wonder whether the exaggeration is done intentionally (by people who have vested interests) to cause distress in the market and push down the price further,” he said.

This entry was posted on Tuesday, August 26th, 2008 at 12:11 pm and is filed under Palm Oil Prices News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.