Palm oil prices near the bottom?

The price of palm oil, down 67% from a Mar record, is near the end of its decline because supplies will slow and demand for the edible oil will ride out the global slowdown, Goldman Sachs said.

The price is "to a bottom," analysts led by Patrick Tiah in Singapore said in a report. " Edible oil demand has remained relatively resilient even during severe recessions."

The prices of crude oil and other commodities have tumbled this year on concern the worldwide economic slump will reduce demand. Malaysia and Indonesia, the largest producers of palm oil, are felling oil palms and planting younger saplings to cut output. Palm oil is their biggest agricultural export.

The price of the edible oil, based on previous cycles, is mainly driven by supply, Goldman said in a report. The replanting will help reduce output, while the yield from plantations is under "stress," Goldman said. It’s not clear when any rebound will happen, according to the report.

Palm oil, used in cooking and to make biofuels, on Mar 4 reached a record 4,486 ringgit (US$1,236) a tonne in Malaysia.

Still, Goldman cut its price forecast for palm oil for the next 2 years by between 41% and 50%, joining analysts at CLSA Asia Pacific-Markets and UBS AG. Palm oil will probably fetch 1,000 ringgit a tonne in 2009, and 1,250 ringgit in 2010, analysts at CLSA said in a Nov14 report. UBS on Nov 6 cuts its price forecast for 2009 by 31% to US$450 a tonne.