Palm oil may average $650 a ton this year, 14 percent higher than a November estimate, as demand from China and India help pare near-record stockpiles of the world’s cheapest vegetable oil, ABN Amro Asia Securities (Singapore) said.
The commodity may fetch $720 a ton next year, and $750 in 2011, Nirgunan Tiruchelvam, assistant director at ABN Amro Asia in Singapore, wrote in a report. Prices have averaged 1,874 ringgit ($504) a ton since January in Malaysia.
“Core demand should be resilient in China and India,” he said. The nations are the biggest consumers of edible oils.
Malaysian sales to China in January-February totaled 530,350 tons, up 43 percent from a year ago, while exports to India more than tripled to 292,790 tons in the period, according to Societe Generale de Surveillance. China said last month it would import a record 5.3 million tons of palm oil this year.
Oil palms in Malaysia and Indonesia, the top producers, are stressed from record output in 2008, “weakening productivity,” Tiruchelvam said.
May-delivery palm oil on the Malaysia Derivatives Exchange rose for a third day today, gaining 1.8 percent to 1,940 ringgit ($522) a ton. Futures have gained 14 percent since January.
Sime Darby Bhd., the world’s largest plantation company, may benefit the most from higher prices because of an increase in the company’s productivity, he said. ABN has a “buy” recommendation on the shares, which have halved in the past year to 5.5 ringgit. The stock may reach 7.84 ringgit in the next year, ABN said.
ABN upgraded IOI Corp., Kuala Lumpur Kepong Bhd. and PT Astra Agro Lestari of Indonesia to “buy” from “sell.”
Goldman Sachs Group Inc. this week asked investors to take profits on plantation companies’ shares as palm oil prices may drop as much as 15 percent in the next three to six months.
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