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Palm oil producers upbeat on price prospects

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Palm oil prices in Malaysia are plumbing multi-month lows, but palm oil groups are striking an optimistic note on price prospects.

The upbeat outlook comes despite recent pressure as the growth of Malaysian exports eases.

On Monday cargo surveyors reported a slowing trend shipments, as SGS said that Malaysian exports rose by 1.3% month on month in the first 25 days of February, below the 1.7% figure seen at the 20-day stage.

And ITS said that exports as of February 25 were running 1.9% lower than a month ago, compared with a 0.8% pace of decline as of February 20.

May palm oil futures in Malaysia closed down 1.8% on Monday, their weakest close since November 15 2016.

El Nino boost

But Tan Sri Dato' Seri Mohd Bakke Salleh, chief executive of the Malaysian palm oil giant Sime Darby on Monday forecast prices to reach 2,900 to 3,000 ringgit a tonne over March and April.

"The (crude palm oil) price increase was mainly driven by an industry-wide production deficit due to the lingering effects of 2015's El Nino weather phenomenon," Sime Darby said in a statement.

And the positive outlook from Sime Darby follows a similar bullish view from the Singapore-listed First Resources, which cited increased demand in Indonesia and elsewhere in emerging markets to support growth.

Rising Indonesian demand

This month the Indonesian Palm Oil Association forecast biodiesel demand in the world's top palm oil exporter to grow by 30 to 40% in 2017, thanks government support, which will reduce exports of crude palm oil.

"Although palm oil prices have moderated in recent weeks, continued low inventories in both producing and importing countries should continue to provide some support to prices," First Resources said.

"In the longer-term, the Indonesian biodiesel mandate and underlying demand growth from emerging markets will continue to underpin the positive outlook of the palm oil industry," First Resources said.

By William Clarke

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