IOI chairman sees palm oil averaging RM2,000

21/03/2009 (Business Times) - IOI Corp Bhd (1961), the world's third largest listed palm oil producer, said the price of crude palm oil (CPO) could rise 20 per cent due to falling domestic stockpiles.

"We see prices trading within a range of RM2,000 to RM2,300, averaging about RM2,000 a tonne. This should be the fair value of palm oil for the time being," said IOI group executive chairman Tan Sri Lee Shin Cheng, without providing a time frame for the forecast.

"Demand for palm oil is sustaining, as can be seen from the drawdown of stocks in Malaysia. Palm oil stock in Malaysia is now at a 16-month low," Lee said in an e-mail when asked to comment on the price outlook for the tropical oil.

Lee's view on palm oil is closely followed by traders and industry analysts.

Malaysia's CPO inventories fell 15 per cent to a 16-month low last month, a bigger-than-expected drop, as production of the vegetable oil declined faster than the drop in exports, industry data showed last week.

Malaysia is the world's second largest palm oil producer, after Indonesia.

The benchmark palm oil futures contract on the Bursa Malaysia derivatives market is currently hovering slightly above RM1,900 a tonne.

CPO prices have gained nearly 13 per cent this year as stocks in Indonesia and Malaysia dropped to an average of four million tonnes from a record five million in December on good Asian demand.

But industry analysts last week predicted that palm oil prices would suffer from selling pressure in the second half of 2009 due to weaker commodity markets, slowing demand and an uptick in output.

Lee is maintaining his relatively bullish view, which he has held since the fourth quarter of last year, even as the global economic outlook has significantly worsened over the past few months.

"The severity of the current global economic crisis has surprised everyone, including the experts," said Lee.

"This crisis has affected almost all commodities adversely as economic activities slumped. However, vegetable oils, being a staple food item, is more resilient," he said. - Reuters