Palm oil prices are poised to hold at current levels, plantations group Sipef said, even as respected analyst Dorab Mistry forecast a rise in prices ahead, spurred potentially by Malaysia's "tightest-ever stocks".
Sipef, the bananas-to-tea producer, said that there is "no reason for palm oil to lost value", given a dent to stocks from weaker-than-expected production, and support to demand from relatively low values compared with prices of rival vegetable oils.
"It seems that palm oil production," which typically hits a seasonal high around this time of year in key South East Asian growing regions, "has already peaked", said the group, whose comments follows disappointing output data from Malaysia.
"With continued good demand" - which is being supported by "competitive" pricing against other vegetable oils – investors should "not expect any significant stocks build", Sipef said.
"We are positive that prices will remain steady for the remainder of the year, and for the first [half] of 2018," the group said.
However, it flagged that it had accelerated somewhat its palm oil hedging to exploit values which, at $735 a tonne on the Rotterdam export market on Wednesday on a CIF basis, were up nearly $100 a tonne from a June low.
"Capitalising on the improving market of the past few months, we have now sold 95% of the expected production volumes" for 2018, Sipef said.
A year ago, it had sold "nearly 90%" of forecast output.
In fact, higher prices are yet to come this year, according to Mr Mistry, director of Indian consumer goods company Godrej International, also seizing on disappointing output data.
Mr Mistry cut to 19.1m-19.3m tonnes his forecast for Malaysian production this year, from a previous estimate of 19.8m-20.0m tonnes
For Indonesia, he trimmed his output forecast by 500,000 tonnes at both ends of the range to 34.0m-34.5m tonnes.
For Malaysia, this means that stocks - which stood at 2.02m tonnes last month, and tend to peak around the turn of the calendar year - will reach a high of at most 2.3m tonnes in January.
"After that, stocks will decline... all the way to July 2018 and we shall have a period of the tightest-ever stocks in history," he said, forecasting Rotterdam prices at $800 a tonne in January, and potentially $850 a tonne in march, depending on output of rival vegetable oils such as soyoil and rapeseed oil.
However, he also forecast a recovery in palm oil production next year, to up to 20m tonnes in Malaysia, and to 36.5m-37.0m tonnes in Indonesia, which would enable a rebuild in inventories.
Nonetheless, the boost to stocks from this extra output would only kick in "towards the end of the year, when palm oil production rises and peaks around October", he said.
Kuala Lumpur palm oil futures stood down 0.7% at 2,722 ringgit a tonne in late deals.
In Brussels, Sipef shares stood up 2.3% at E65.50.
By Mike Verdin