(Dec 17): Indonesia’s mandate to use more palm oil for producing biofuels and lower reserves in Malaysia will continue to support the tropical oil in the coming months, according to veteran trader Dorab Mistry. 
  
The most-consumed cooking oil may trade between RM3,500 and RM5,000 a ton between now and the end of May, unless the war in Ukraine ends, said Mistry, who has been trading palm for about four decades. 

“The war has cast a huge unexpected shadow on the world economy,” he said in slides prepared for an industry conference in Goa. 

The latest prediction by Mistry, who’s a director at Godrej International Ltd, compared with his November forecast of prices reaching as high as RM4,500 a ton through the end of March 2023. 

Palm oil futures, which recently hit a two-month low, closed 1% higher at RM3,918 on Friday. The vegetable oil had slumped to RM3,336 in late September, its lowest since early 2021.   

Mistry said that higher demand from the biofuel industry would continue to support palm prices. His comments followed an announcement by Indonesia, the world’s biggest palm oil producer, on Friday to raise its biofuel blending ratio from January. 

The new mandate, known as the B35, will require the country’s biodiesel to contain 35% palm oil from next year, compared with the current 30% mix. The move has the potential to cut palm exports from the country, which accounts for about a third of global edible oil trade. 

More details from Mistry’s presentation:

• Second-biggest grower Malaysia will produce close to 19 million tons of palm oil next year as labour shortages ease. Indonesia will produce only about 1.5 million tons more than this year.
• Indonesia may increase its biodiesel use to 40%. The Southeast Asian country’s B35 rule may keep palm stockpiles tight in the first half of 2023.
• Malaysian palm oil stockpiles will continue to drop until May 2023, and slip below two million tons.
• India’s total edible oil imports may total 14.4 million tons in 2022-23, compared with 14.2 million a year earlier. Palm oil purchases will likely climb to about 8.3 million tons from 7.93 million.
• US EPA’s announcement on biofuel mandates was a “damp squib”. The scale of the resulting sell-off surprised most of the market and soyoil’s premium to palm narrowed.