Date:03/03/2005 URL: http://www.thehindubusinessline.com/2005/03/03/stories/2005030301961200.htm

Back Vegoil market awaiting clear direction

G. Chandrashekhar

Kuala Lumpur , March 2

A day ahead of the much-awaited Palm Oil Price Outlook 2005 conference here, the mood among players in the vegetable oil market is upbeat with a tinge of nervousness because of the recent turn of events.

Despite the current demand-supply fundamentals suggesting a steady market at prices friendly to consumers, the price spurt of the last few days has taken many by surprise.

Soyabean oil has risen by about $50 a tonne following dry weather induced concerns about the Brazilian soyabean crop.

Taking a cue from soyabean oil, palm oil too has moved up significantly over the last few days with prices breaching the psychological barrier of Malaysian ringgits 1,400 a tonne, despite inventory levels reaching 1.5 million tonnes. Expectation of a mild El Nino is adding to the uncertainty.

In addition to dry weather impacting crop prospects in Brazil, Asian soyabean rust threat in the US is another issue to be closely watched.

The American Agricultural Outlook 2005 meeting held in Arlington (US) late last month came up with the forecast of 78.5 million tonnes (mt) US soyabean crop for 2005-06 season, down from the record 85.6 mt for the current year.

Although the crop is yet to be planted and with harvest seven months away, this is a potentially bullish factor for the global vegetable oil market. In addition, diversion of vegetable oils for bio-diesel is expected to touch 3 mt in 2005.

The question in everyone's mind here is whether the bear phase has come to an end and a bull run has begun. Experts from different parts of the world will share their views on the market dynamics over the next two days.

Their job will be rendered more difficult as market conditions have kept changing frequently not only in response to the weather changes but also to the tariff changes made by the Indian Government.

A record attendance of delegates from across the world is expected this year, according to an official of the Bursa Malaysia Derivatives or BMD (formerly, Malaysian Derivatives Exchange), which is the organiser of this global event.