Palm oil prices have scope yet for short-term recovery, but will "trend lower" in the second half of 2017, weighed by soft Chinese and Indian demand, besides recovering world output, Anglo-Eastern Plantations said.
The palm oil and rubber producer, terming "high" current prices of the vegetable oil, said that they "should sustain at least into" the April-to-June quarter, underpinned by the impact of the last El Nino on reducing production, and fostering a run-down in world inventories.
Rotterdam palm oil prices, which on Tuesday stood at $662 a tonne according to EQS, "are expected to be in the range of $650-850 a tonne for the first half of 2017", Anglo-Eastern Plantations said.
"We do however expect the crude palm oil price to trend lower for the remaining of 2017 as production recovers," the group said, reflecting broad expectations of a revival in output in top growers Indonesia and Malaysia from levels depressed by dryness blamed on El Nino.
The company flagged too the much-vaunted prospect of a rise in output of rival vegetable oil soyoil, reflecting a 7.3% rise of 334m tonnes in soybean production in 2017, on Oil World forecasts.
However, it also noted less-widely-debated ideas that demand from leading importers India and China "is unlikely to increase significantly in 2017," after suffering in India last year from a knock-on effect of the removal of high-value bank notes.
"Retail sales suffered as many do not have sufficient cash to buy and pay for essentials resulting in a weaker demand for crude palm oil," said Madam Lim Siew Kim, the Anglo-Eastern Plantations chairman said.
The group added: "The current high crude palm oil prices typically cap demand particularly from price-sensitive countries like India."
Meanwhile in China, "continued structural adjustment… will continue to moderate China's economy growth hence limiting palm oil consumption".
The comments came as the group unveiled a 20% jump in its own production of fresh palm fruit bunches in the first three months of 2017, although adding that "it is too early to forecast whether the production will be better for the rest of the year".
Separately on Wednesday, Rabobank cut its forecasts for Malaysian palm oil futures by up to 250 ringgit a tonne, on a quarter-average basis, leaving the expectation for values in the last three months of this year at 2,550 ringgit a tonne.
For producers, "the fresh fruit bunch yield will improve in the April-to-June quarter", the bank said, flagging the potential for reduced use of palm oil in making biodiesel in the European Union and US too.
"The European Parliament recently voted for a draft resolution that would restrict the usage of palm oil, and potentially also soyoil, in biofuels," although the move would require approval by the European Commission before becoming law.
"Meanwhile, the US has initiated anti-dumping and countervailing duty investigations of biodiesel imports from Argentina and Indonesia."
Indonesia, which makes its biodiesel from palm oil, sends more than 90% of its exports of the biofuel to the US.
By Mike Verdin