Dry weather for the past 50 to 60 days has resulted in moisture shortages for some plantations and water rationing, the Hamburg-based researcher said in a report. Further dryness in the next two weeks may spur “an even more bullish supply scenario” in the next year, according to the report.
“Every additional day of dryness will increase the stress and result in yield losses and correspondingly lower-than-expected production,” Oil World said. “Additional downward potential of vegetable oil prices is limited, considering the bullish palm oil outlook.”
Palm oil traded on Bursa Malaysia Derivatives in Kuala Lumpur rose to an 18-month high at 2,916 ringgit ($890.84) a metric ton on March 11 after dry weather raised concern that output will be damaged. Prices have since declined 6 percent.
Global palm oil output may total 58.5 million tons in the 2013-2014 season, with Indonesian production at 30 million tons and Malaysian output reaching 19.6 million tons, Thomas Mielke, Oil World’s executive director, said at a conference March 5. Because of lag times in the crop development cycle, the impact of dry weather on production may not be seen until the fourth quarter, with further yield losses expected in 2015 and 2016, Oil World said in today’s report.
Separately, Oil World said global supplies of sesame seed face a “severe tightening” amid declining output in India and rising demand from China. Prices in India’s Gujarat wholesale market are “unusually high” at about 140,000 rupees ($2,281) a ton, compared with a record 156,000 rupees in November. India’s production in the 2013-14 season that started in October will fall to 672,000 tons, a four-year low, and down from 685,000 tons a year earlier, it said. China’s imports rose 12 percent to a record 442,000 tons in 2013, it said.
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