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Does La Nina spell a downturn for palm oil prices?

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Is the La Nina, which forecasters have said is an increasing likelihood, in fact already here?


Sunny Vergehese, the founder and chief executive of Singapore-based ag trading giant Olam International, sees its fingerprints over improved production of palm oil in the key South East Asian growing countries.


“In palm, both Malaysia and Indonesia are benefiting from this and production is increasing and stocks are going up,” he said, speaking days after official data showed Malaysian output topping 2.0m tonnes last month for the first time in two years.


Stocks, meanwhile, hit a 21-month high of 2.19m tonnes, remaining above a 2.0m-tonne level that Mr Verghese called a “critical threshold”.


‘Quite bearish’


With Indonesia boasting inventories of 3m tonnes, he said, the two key palm-producing countries hold 5.2m tonnes between them, a position that Olam expects “to grow to about 6.3m tonnes by end of December 2018.


“Recovery is happening in the production. And that means excess supply,” and pressure in palm oils ahead.


While “in the near term, we believe that there’s some upside to palm prices, in the 12-to-15 month timeframe, we expect palm prices to be quite bearish”, Mr Verghese told investors.

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