James Fry, Chairman, LMC International is also positive on excess supply of crude in coming few quarters and expects the price to go up to $50/ barrels by next year.
James Fry, Chairman, LMC International expects domestic production of palm oil to be better this year owing to good monsoons.
"Import demand for palm oil is expected to be high in the final quarter of FY17, and India will need to replenish palm oil stock by late this year," he added.
He is also positive on excess supply of crude in coming few quarters.
"I trust data from the US Department of Energy and they have predicted that until the third quarter of next year, the world will continue to run a supply surplus of crude and only by CY18-end will the market get back to balance," he said.
He expects the price to go up to USD 50/barrel by next year.
Excerpts from the conversation.
Q: The monsoon this time around of course, is expected to be on the positive side, after a couple of drought seasons that we have seen. The sowing though is delayed. What is your sense when it comes to the Indian supply and demand for the vegetable oils?
A: Here in India, I get the impression that people are partly waiting. Just in terms of immediate demand for palm oil or vegetable oils generally, they are just waiting to get a sense as to first of all, the monsoon which is looking good. So, the domestic production will be better. But they are looking ahead to the final quarter of the year to see the import demand which is expected to be high for palm oil in the final quarter of this year. So, that is really domestic demand, good, the economy, good, but production also good from local crops. But even so, you are the world’s biggest importer and you will need to replenish your palm oil stocks by sometime late this year.
Q: The prices of course, have been quite volatile and as is the case with all other agricultural commodities, the edible oil sector also has seen a huge run up in prices. What is your sense as we move forward from here?
A: The prices we have had among the key factors on the demand side has been the Indonesian biodiesel mandate and because of the way it is funded, when palm oil is expensive against crude oil, they cannot fund so much. So, the Indonesian biodiesel so far this year, is running at much lower levels than was originally being spoken of because palm oil was too expensive. So, in terms of the price outlook, that was partly holding back prices. Another factor was China. China actually was selling over two million tonnes from its state reserves. The selling from China has stopped and the Indonesian biodiesel mandate is still continuing at a fairly low level. But, with a much higher production kicking in now, for the second half of the year, palm oil prices have to come off.
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