By Claire Leow
Aug. 7 (Bloomberg) -- Palm oil could average 2,300 ringgit ($657) a metric ton this year, 10 percent higher than a previous forecast, amid concerns that an El Nino may curb output as the weather pattern parches parts of Asia, Deutsche Bank AG said.
El Nino, which creates unusual weather in various parts of the world, may delay rains in Asia, the U.S. National Oceanic and Atmospheric Administration said on July 9. About 90 percent of global palm oil output comes from Indonesia and Malaysia.
Palm oil has advanced risen 37 percent this year after a drought in Argentina ravaged one-quarter of the soybean crop, boosting demand for rival palm oil. The tropical commodity has also gained on higher crude oil prices and on speculation that demand will increase as the global economy recovers.
“Less precipitation significantly affects production about nine months into the future,” Teoh Su-Yin, plantation analyst at Deutsche Bank in Kuala Lumpur, said by e-mail today. “In the near-term, it would negatively affect the bunch weight, leaving a lower oil extraction ratio but the main impact on the fresh fruit bunch yield will be in 2010.”
Indonesia may miss next year’s production target by as much as 20 percent if a severe El Nino develops, Achmad Manggabarani, director general of plantations at the Ministry of Agriculture, said July 21. The ministry had forecast output to gain 8 percent to 23.3 million tons next year before the El Nino warning.
Malaysia may see production shrink by as much as 16 percent next year if the weather event occurs, Plantation Industries and Commodities Minister Bernard Dompok, said July 16. Output may total a record 18.3 million tons this year.
Beating Forecast
Palm oil may reach 2,500 ringgit in 2010, 32 percent higher than a previous forecast, said Deutsche Bank’s Teoh. Futures had the biggest weekly jump in 18 weeks, gaining 6.9 percent. Sugar prices may also benefit from the weather event, the bank said.
El Nino’s impact for South America may be “pronounced,” worsening a shortfall of soybeans, Deutsche said today in a report led by Niklas Olausson and Xun-Ming Ip.
Soybeans are sown in October in Brazil and in November in Argentina, a time when El Nino “reaches maximum intensity,” resulting in heavy rains that damage crops, said the analysts. “Any shortfall in the harvest would be very bullish for soybean and palm oil prices,” it said.
The U.S., the largest grower of soybeans ahead of Brazil and Argentina, will release data on its crop next week.
“As exports and future export capacity has plummeted in South America, the U.S. crop needs to be good just to offset this in the global marketplace,” the report said.
Soybeans traded in Chicago have advanced 5.2 percent this year on concern a record crop in the U.S. would not be enough to compensate for losses in South America’s crop.
Asian Crops
The drought and flood-causing pattern would affect many other crops in Asia, including grains and soybeans in China, sugar in India, coconuts in the Philippines, coffee in Indonesia and Vietnam, rice in Thailand and its neighbors, the report said.
“El Nino would cause natural rubber yields to come under pressure in Southeast Asia, mitigating expectations of rising inventories,” the report said. “Sugar prices have already shot up on the back of last year’s poor crop in India, but the weak monsoon is raising new supply concerns for the world’s second largest producer.”
Sugar jumped to a 28-year high yesterday in New York as low monsoon rains in India threatens to damage cane crops and excess showers in Brazil curbed output. Rains in India were 25 percent below the 50-year average in the June 1-Aug. 5 period, the state weather bureau said yesterday.
To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net
Posts
No comments:
Post a Comment