Palm oil's premium over soyoil to diminish in coming months, says analyst Mielke

Palm oil's price premium over soyoil is expected to decrease within the next one to three months, as higher prices have been moderating demand in key consuming markets such as India, leading industry analyst Thomas Mielke said on Wednesday.

Palm oil stocks could start rising in the coming months if demand fails to pick up, Mielke, executive director of Hamburg-based forecaster Oil World, said at an industry conference.

Palm oil has been trading at a premium over other rival oils in recent months due to supply disruptions from top producers Indonesia and Malaysia, caused by floods, while Jakarta has also worked to increase the use of the tropical oil in biodiesel production.

As a result, major buyers, including India, have turned to soybean and sunflower oils, leading to a decline in palm oil demand.

However, Mielke said that the price spread between palm oil and soybean oil is temporary, and the lower demand for palm oil will eventually put downward pressure on its prices.

"Soybean oil and sunflower oil will be able to replace palm oil only temporarily," the analyst said.

Palm oil's share of India's annual edible oil imports is likely to drop below soft oils for the first time, as higher prices of the tropical product drive refiners to seek more affordable alternatives.

Malaysian palm oil traded in a tight range, with weakness in rival oils weighing on prices, although estimates for lower output this month limited the downward trend.

"We have seen some appreciation in prices in all vegetables over the past two weeks," Mielke said. "With these prices, Indonesian producers have become more active sellers."

Palm oil is being offered at a premium of $50 per metric ton in India this week.

Sunflower oil prices are expected to rise in the coming months due to limited supplies, and prices for soyoil and rapeseed oil prices are likely to follow the trend, he said.

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