"Vegetable oils supply is under pressure. For the first time in history, Malaysia's palm oil production will fall for two years in a row, and this year it is likely to be 17.2 million tonnes.
"My reasons are already well-known - the prevailing El Nino (weather conditions), the government's ongoing replanting scheme and most biological cycle of palm trees," said India's Godrej Group director Dorab Mistry.
The El Nino can bring glo-bal weather chaos such as droughts and floods, damaging agriculture crops.
"It looks as though the El Nino 'induced damage' to the palm oil output will be felt in the second half of this year, just as the biological cycle turns from high to low," he said.
Mistry also said that a strong US dollar in the next few months acts as a calming influence on commodities prices.
However, he expects the greenback to weaken around July, prompting commodities to move ahead strongly.
"Post-July, I expect palm oil futures to scale new heights in the range of RM2,800 to RM3,200 per tonne in order to ration demand," he said.
Apart from Mistry, analysts Anne Frick of Prudential Bache Commodities LLC and Nagaraj Meda of Transgraph Consulting Pvt Ltd also presented bullish price forecast to some 1,800 vegetable oil traders at the Palm and Lauric Oils Conference 2010 in Kuala Lumpur yesterday.
- BUSINESS TIMES