Palm oil production may hit 44 million tonnes

G. Chandrashekhar

Washington DC, June 9 With Argentine farmers suspending their strike, the possibility of soyabean prices moving south is emerging stronger.

A sharp price rally was the response of the market to the worsening situation in Argentina (world’s third largest producer).

Despite harvest of a record 47 million tonnes, bean and derivatives exports have been severely reduced, if not entirely halted, by farmers’ blockades. Independent truckers in Argentina widened the extent of the roadblocks to try to force a resolutionbetween striking farmers and the Government.

Given the supply uncertainties, export business is being shifted to Brazil and the US for soyabean and products, experts pointed out adding all this is happening when the US itself had very tight old crop supplies.

Despite suspension of strike, the supply situation is expected to stay tight for some time and pricesare unlikely to ease.

Trade interest is now shifting to new crop contracts in the US where planting is nearing completion and harvest would be in September/October.

No wonder, large speculators have already shifted some of their long positions into new-crop contracts. Last week, November soyabean contracts tested, but did not reach, their contract highof $ 14.73 a bushel.

Meanwhile, despite widely anticipated rebound in the US soyabean crop resulting from the ongoing planting season, the possibility of a further shift of acreage to soyabean is seen highly probable.

There have been thunderstorms in parts of the Midwest where corn has been washed away and the soil is still too wet for replanting. The acreage could shift to soyabean.

While this would boost soyabean planting, there is also the possibility that yields could be hurt.

Clearly, the market would remain weather-driven and a large correction unlikely anytime soon.

Beans in the teens (soyabean price remaining $ 13 and upwards) is something traders seem to swear by.

World prospects for 2008-09: The market keenly awaits the US Department of Agriculture (USDA) report of first estimate of world oilseed crops and soyabean balance sheet for 2008.

Some inputs are already available. World production of major oilseeds is anticipated to expand. Specifically, world soybean production in 2008-09 could rebound close to 10 percent to around 242 million tonnes, up 22 million tonnes from previous season.

Production the US itself could be 80 million tonnes or above. After Chinese crop losses in 2007-08, world rapeseed production may increase by 4 million tonnes to a new high of 51-52 million tonnes in 2008-09, while sunseed may be up by about 2.5 million tonnes to over 30 million tonnes. Importantly, palm oil output is expected to expand by about 4 million tonnes to a new high of 44 million tonnes (41.1 million tonnes).

So, in 2008-09, world vegetable oil production could be considerably higher; but the price effect would be muted by lower opening stocks. Rising crude market is expected to prop up vegetable oil prices in the light of diversion for biodiesel purposes. The emerging market fundamentals for vegetable oils suggest a significant correction in prices should crude prices move closer to or below $ 100 a barrel, a prospect not many visualise at the moment.

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