Edible-oil prices may climb as growth in worldwide supply fails to keep pace with the rise in demand for a third year, with weather patterns hurting crops, according to Godrej International Ltd. Director Dorab Mistry.
PALM OIL AND SOYBEAN OIL
Palm oil may gain to 3,300 ringgit ($1,072) per metric ton in the next few weeks and extend gains in 2011, according to remarks Mistry prepared for delivery at the DCE oilseed conference in Guangzhou, China today. The contract ended Nov. 4 at 3,191 ringgit. Soybean oil in Argentina, the largest exporter, may climb to $1,250 a ton by January, according to the remarks, raising Mistry’s forecast from $1,050.
Higher prices may add to costlier food, fanning inflation. World food prices climbed to the highest level in more than two years in October on more expensive meat, cereals, cooking oils and sugar, the United Nations’ Food and Agriculture Organization said. Mistry correctly predicted in March that palm oil would exceed 3,000 ringgit after June on lower yields.
“We have looming supply problems in wheat, in rice, in corn, in canola, in sun seed and, above all, in soybeans,” the text said. “We must therefore begin to give up too many thoughts of any meaningful decline in vegetable-oil prices during 2011.”
Palm oil on the Malaysia Derivatives Exchange has rallied for 10 weeks, gaining about 26 percent on concern recent excess rains may disrupt harvests in Malaysia and Indonesia. Prices are at the highest since July 2008.
TIGHTENING SUPPLIES PLUS INELASTIC DEMAND
Tightening supplies and “inelastic demand” from countries including China will extend the “crazy” price rallies this year, Tao Chen, chairman of Louis Dreyfus Commodities (Beijing) Trading Co. said at the conference.
Supplies of soybean, palm, coconut, groundnut, cotton, rapeseed and sunflower oils will rise 3.5 million tons in the year to September 2011, according to Mistry’s remarks. That’s less than the 3.8 million-ton gain he forecast on Sept. 26. Demand in the same period would rise as much as 5 million tons, according to the text.
DROUGHT AND GLOBAL WARMING
An El Nino-induced drought hurt oil-palm yields in Indonesia and Malaysia, the largest producers, this year, while a La Nina-induced drought delayed planting of the South American soybean crop and hurt yields. Palm oil and soybean oil are the most consumed edible oils and are direct substitutes.
SOUTH AMERICAN SEASON
“The world situation in soybeans is tighter with each day,” the text of the prepared remarks said. “We are in the midst of the South American growing season and we have yet to see the full effects of this year’s La Nina.”
Soybean farmers in Brazil’s Mato Grosso state, accounting for about 30 percent of the nation’s crop, finished planting about 31 percent of the planned area as of Oct. 28, the Mato Grosso Institute of Agricultural Economics said. This time last year, growers had completed 51 percent, it said.
In Argentina, soybean yields are forecast to be lower than average because of dry weather, the Buenos Aires Cereals Exchange said Oct. 28.
“Weather disturbances in the form of drought, wet springs, flooding and frosts have been more evident this year than any other year I can recall,” Mistry’s text said.
Dr. Pinna says:
See my articles related to the price of sugar and “The Drying Earth.”
Global warming is producing drought. The world population keeps increasing. Food is “Inelastic.” Look forward to higher food prices. Watch the Obesity Pandemic disappear…
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