Malaysian Palm Oil Council Russia's Post

Mistry Sees Bullish Palm Oil Through May as La Nina Scorches Soy
By Anuradha Raghu
(Bloomberg) -- Palm oil prices may stay elevated over the next four months as La Nina ravages soybean crops in South America, reducing supplies of the tropical oil’s main rival, according to veteran trader and analyst Dorab Mistry.
“The new factor in the last two weeks is the deterioration in South American soybean crops due to the La Nina dry weather,” Mistry, director at Godrej International Ltd., said in an emailed response to questions. “This means the period of high prices is likely to be prolonged at least until May.”
The world’s most-consumed edible oil surged to an all-time high of 5,700 ringgit ($1,365) a ton in intraday trading on Monday in the wake of export restrictions from top producer Indonesia as well as persistent concerns that a chronic worker shortage in Malaysia will curb supplies through the first quarter. Mistry in December predicted that benchmark futures will trade from 5,000 ringgit to 5,400 ringgit through February before easing in March. 
 
La Nina, which brings high temperatures and dry weather to South America, has damaged soy crops in key growing regions of southern Brazil and Argentina, with more drought likely ahead. The crop losses have taken the market by surprise as planting initially progressed smoothly and buyers including Chinese firms anticipated bumper crops. But now farmers are holding back grain and soybean sales on bets that prices will keep rising as the region’s harvest continues to shrink, exacerbating the supply squeeze in global edible oils.
Prices of palm, used in everything from cooking oil to soaps and biofuel, have nearly tripled from their early pandemic low, while Chicago soybean oil has climbed more than 150% in the same period, stoking fears of rising living costs for consumers. The United Nations’ index of global food prices jumped nearer to a record last month as vegetable oils and dairy became more expensive.
After May, the tropical oil’s direction will depend on the recovery in production, Mistry said. On the consumption side, the rally has already begun to dampen demand from key buyers. Cargo surveyor data from SGS Malaysia Sdn. showed exports from the No. 2 grower slumped 27% in January from a month earlier as shipments to India and China tumbled 34% and 26% respectively. 
“We are seeing some demand destruction in the case of palm in price sensitive markets,” Mistry said. “That factor plus a recovery in production will eventually lead to lower prices.”
By: via Malaysian Palm Oil Council Russia