Producers flag hopes for falling palm oil prices

Palm oil groups flourished reasons for hope for prices of the vegetable oil even as futures fell in Kuala Lumpur near to their lowest in 10 months, and down by one-quarter from a February high.

Anglo-Eastern Plantations and New Britain Palm Oil acknowledged the rationale behind a drop in palm oil prices which, at one point on Friday, dipped 1.4% to 2,953 ringgit a tonne in Kuala Lumpur for November delivery

"The impact of the European debt crisis and health of the global economy [have weighed] on sentiment," New Britain said.

At Anglo-Eastern, chairman John Lim Cheng Chuan said the downwards "correction" reflected "a strong recovery in palm oil supplies and slower exports", besides a selldown by China of state inventories in a bid to curb inflation.

Traders also cited a move by Indonesia, the world’s biggest palm oil producer and exporter, to lower the ceiling on its export tax on exports of the edible oil to 22.5% from 25%.

‘Remain rangebound’

However, New Britain highlighted that stocks of the vegetable oil were, at one-and-a-half months’ consumption, "relatively low". Levels of inventories, as compared with demand, are viewed as a key indicator of price potential.

Mr Chuan said it was "generally felt that the palm oil price is likely to remain rangebound in the third quarter, fuelled by pick-up in demand during Ramadan festivities, lower-than-expected soybean harvests from North America and rapeseed crops from Europe".

Germany, the European Union’s biggest rapeseed producer, has suffered a dismal season, with output hurt by poor sowing conditions, which left the crop in poor shape to deal with a cold winter, besides a dry spring and rain-hampered harvest.

The DBV German Farmers Association on Thursday pegged the country’s rapeseed crop at 3.7m tonnes, down 378% on last year’s harvest, saying the weather had "just been terrible".

Production recoveries

Mr Chuan made his comments as Anglo-Eastern unveiled an 80% rise to $36.1m in earnings for the first six months of the year, on revenues up 65% at $128.9m, lifted by rising production besides prices which, despite their recent fall, were higher than a year before.

Production of palm fruit bunches rose 18.6% to 315,787 tonnes, helped by "improved weather conditions" in the group’s Bengkulu plantations in Indonesia.

New Britain, a specialist in palm oil from supplies deemed sustainable, said earnings rose 66% to $186.2m for the half year, on revenues near-doubled to $403.9m, also helped by higher prices and production, after torrential rains battered its plantations, in Papua New Guinea.

Indeed, rainfall in the first half of 2011 "was the lowest on record and continues to be lower than the average, but still ample for excellent growing conditions, with good sunshine hours, and there have been no negative weather impacts on operations".

New Britain shares closed 5.3% to 850p in London, where Anglo-Eastern stock added 1.1% to 666p.

http://www.agrimoney.com/news/producers-flag-hopes-for-falling-palm-oil-prices—3525.html