Firm vegetable oil prices, including palm oil, seen in H1 2011

KUALA LUMPUR: Global vegetable oil prices, including that of crude palm oil (CPO), are expected to remain firm in the first two quarters of 2011 should soybean production from South America stays flat due to stagnating planted areas, said Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Dr Yusof Basiron.

Soybean production in South America next year would be the main factor in determining the price direction of vegetable oils in the first half of next year.

“At this point of time, the projected lower soybean production may further deteriorate as dry spell remain a teething factor for the output,” Yusof said.

He said this in his summary after presenting a paperwork on Glimpse of 2011 – Pointers for 2011 on Global Oils and Fats Trade at the 3rd International Palm Oil Trade and Seminar yesterday.

In addition, an increase in soyoil application for biodiesel production in South America was expected to reduce the availability of soyoil traded globally.

However, CPO production from major producers Malaysia and Indonesia next year may rise substantially due to the delay in potential yield this year as a result of El Nino and La Nina effects, he added.

Palm oil was also expected to continue to be the growth leader in output, with Malaysia and Indonesia as the main supplier for 2011.

For 2010, Yusof said the average CPO price was projected to stay above RM2,600 per tonne, given the firm crude mineral oil price, which had supported the palm oil price so far, “is expected to last for the rest of this year.”

While demand is projected to increase by 4.3 million tonnes this year, the performance of oils and fats production in the last quarter would determine whether there will be any changes in production volume projected in 2010.

He said: “The United States, the European Union (EU) and China are on the radar as their major oil crops are due for harvesting and entering the market at this period.

“The estimated production remains intact and this has been factored into the current CPO price trading at above RM2,700 per tonne.”

Yusof said price would also be supported by the greater role of palm oil in satisfying global demand this year. In addition, the La Nina effect on palm oil production in the second half of this year could likely increase palm fruit moisture content and lower extraction rates, thus reducing harvesting rounds.

Based on OilWorld estimate, La Nina phenomenon would likely reduce Malaysia’s palm oil production by 200,000 tonnes.

US-based Green Earth Fuels LLC executive vice-president (government and regulatory affairs) Jeffrey M. Trucksess said palm biodiesel (palm methyl ester – PME) had made significant inroads in the US biodiesel market in recent years and had tremendous potential.

“However, significant political, regulatory and public relation issues can derail this future,” he said.

PME producers from Malaysia must proactively manage the public perception on palm oil in the United States and Europe by providing more education to policymakers there, actively participate in regulatory bodies and promote sustainability standards.