Rabobank signalled a downgrade ahead in its forecasts for
prices of palm oil, which it had rated as its most bullish agricultural commodity
for 2013, after Malaysian stocks of the vegetable oil defied market expectations
by rising to a fresh record high.
Palm oil inventories in Malaysia, the second-ranked producer
and exporter of the oil, rose 2.4% to 2.63m tonnes last month, beating by
60,000 tonnes the previous record, set in November, the Malaysian Palm Oil
While exports fell by only 0.7% month on month, far less
than the 4.1% drop expected, production outpaced forecasts too.
At 1.78m tonnes, it beat market estimates by more than
80,000 tonnes, and defied predictions of a rapid seasonal slowdown.
'Uncertainty around demand'
Indeed, Malaysia's production had continued to beat
expectations, a factor "likely to prolong the period that stock levels remain
elevated", Rabobank said.
Malaysia palm oil data, November, change on month and (on forecast)
Production: 1.78m tonnes, -5.9%, (+80,740 tonnes)
Exports: 1.65m tonnes, -0.7%, (+57,050 tonnes)
Stocks: 2.63m tonnes, +2.4%, (+127,934 tonnes)
Source: Malaysian Palm Oil Board
Meanwhile, "uncertainty around future import demand,
particularly to China, has acted to limit upside price moves".The bank forecast that palm oil prices - which closed down
1.0% at 2,385 ringgit a tonne in Kuala Lumpur on Thursday - will remain "rangebound
in coming weeks until a seasonal slowdown in palm oil production is likely seen
The forecast contrasts with an estimate in the bank's 2013
outlook, published in late November, and which placed palm oil as the top bullish bet in agricultural commodities, that values would average 2,800
ringgits a tonne in the first quarter of the year.
The bank was now "not so comfortable" with its price
estimate for early 2013, Rabobank analyst Erin FitzPatrick told Agrimoney.com
on Thursday, adding that group would next week issue fresh crop price forecasts.
Palm oil vs soyoil
However, Ms FitzPatrick also cautioned against betting on
price declines, saying that "downside appears to be limited" by the discount of
palm oil's prices to those in rival vegetable oils.
Palm oil prices were $375 a tonne lower than those in soyoil
on average last month, and $108 a tonne below those of Brent crude oil, against
which vegetable oils are linked by their use in making biodiesel.
"Although the spreads have narrowed slightly in the first
two weeks of January, they remain historically large," Rabobank said.
"In the medium-to-longer term we view this price discount as
unsustainable, and expect a seasonal slowdown in palm oil production to emerge
by the end of the first quarter of 2013 which should narrow the price discount
to Chicago soyoil."
Separately, China, the second-ranked palm oil importer, on
Thursday revealed that its buy-ins of vegetable oils overall in December
reached a record 1.1m tonnes.
However, the impact of the data, which did not give a
breakdown by oil type, on boosting prices of palm oil was muted by its decreasing
contribution to Chinese needs.
Palm oil accounted for 68% of Chinese vegetable oil imports
in the July-to-November period, down from a long-term average of 75%.
"We believe the demand outlook is being clouded by Chinese legislation
on the use of retail edible oil blends, and lower reported per-store sales by
major food service companies in the second half of 2012," Rabobank said.