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No End in Sight to Rising Soy, Palm Oil Prices, Refiner Says
Thomas Kutty Abraham | January 18, 2011

Soybean output in Argentina, the third-largest producer, is forecast to fall 15 percent to 47 million metric tons this year because of water shortages in the main growing regions, the Buenos Aires Cereals Exchange said on Thursday. (Bloomberg Photo) Soybean output in Argentina, the third-largest producer, is forecast to fall 15 percent to 47 million metric tons this year because of water shortages in the main growing regions, the Buenos Aires Cereals Exchange said on Thursday. (Bloomberg Photo)
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Soybeans and palm oil may extend rallies from two-year highs as weather disruptions to oilseed crops strain global vegetable oil supplies, according to India’s biggest importer and refiner of cooking fats.

Prices of vegetable oils and oilseeds may gain as much as 15 percent in the next three months as supply trails growth in demand from China and India, as well as biofuel needs from the European Union, Dinesh Shahra, managing director of Ruchi Soya Industries, said on Tuesday.

Higher cooking-oil costs may worsen record global food inflation as prices of sugar, grains and oilseed top levels reached in 2008, when accelerating food prices sparked riots from Haiti to Egypt.

Governments from Beijing to Belgrade are boosting imports, limiting sales or releasing stockpiles to curb food inflation.

“It’s a supply-led market with no relief in sight,” Shahra said.

 “There’s extreme tightness in the world market as soybean crops in Argentina will be substantially reduced by the dry weather.”

Prices of palm and soybean oils have rallied to the highest level in more than two years on concern that global supplies may tighten as dry weather threatens harvests in Latin America and flooding disrupts oil-palm harvests in Indonesia and Malaysia.

Soybean output in Argentina, the third-largest producer, is forecast to fall 15 percent to 47 million metric tons this year because of water shortages in the main growing regions, the Buenos Aires Cereals Exchange said on Thursday.

“Uncertainty is not over yet about the supply situation, and any more bad news on the weather front can send prices sharply higher,” Shahra said.

Global oilseed production will be 441 million tons, about two million tons below consumption and paring stockpiles 2 percent from a year ago to 77.9 million tons, Oil World, a Hamburg-based researcher, said in December.

Palm oil prices will remain above 3,000 ringgit ($980) per ton and are not likely to come down as global demand for the vegetable oil is on the rise, Malaysian Plantation and Commodities Minister Bernard Dompok said on Tuesday.

Futures reached 3,905 ringgit on Jan. 4, the highest price since March 2008, and soybean oil rose to 59.1 cents per pound in Chicago on Jan. 3, the highest since August 2008.

Soybean meal exports from India, Asia’s biggest supplier of the animal feed, may be more than 3 million tons by March as farmers speed up sales to benefit from high prices, Shahra said.

“Farmers are getting good prices, crushers are making a decent margin and this augurs well for next year’s crop,” Shahra said. “There will be every reason for farmers to plant more oilseed next year.”
 

Bloomberg