Malaysian CPO futures in fell for a second day, erasing earlier gains, as the fourth day of declines in crude oil prices reduced the appeal of the tropical commodity as feedstock for alternative energy. Palm oil for Nov fell 33 ringgit, or 1.3%, to close at 2,451 ringgit (US$712) a tonne on BMD.
"Palm oil prices are currently undervalued,'' Thomas Mielke, chief editor of OilWorld, the trade publication, said from Siem Reap, Cambodia. "At this level, palm oil consumption for energy is set to rise sharply."
Still, "palm oil prices will rebound in the fourth quarter,'' Tan Ting Min, a research analyst at Credit Suisse, wrote in a report today. "Malaysian palm oil exports in Aug grew to hit an all-time high, driven primarily by a strong pick-up in exports to India and Pakistan ahead of the festive seasons.''
"We expect a pick-up in Sep,'' wrote Tan. "Palm oil exports to the Middle Eastern countries should also be higher ahead of the festive season.''
Palm oil may average 7.6% more in the year ending Jun '09 because of increased demand for biofuel, said OilWorld's Thomas Mielke.
The tropical commodity may average US$1,120 a tonne, up from US $1,041 a tonne the previous year, Mielke said.
Increased demand for the tropical oil as feedstock for biofuel would support palm oil prices unless crude oil prices declined, he said.
Argentine soybean oil may average US$1,250 a tonne in the year ending Jun, up from US$1,105 a tonne the previous year, he said.
"Palm oil will be rising less than the soybean oil as there's less supply issues in palm oil than in the soybeans,'' he said.
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