May 9, 2012

China's edible oil futures seen higher in medium term

Edible oil futures on China's commodity futures exchanges are seen to go higher in the medium term on speculations of global oilseeds yield drop as well as export revival of Malaysia palm oil, according to Yang Wenxin, an analyst with CITICS Futures Co.

The USDA continued to revise down estimates for South America soy output in its latest report. It cut soy output forecast of Brazil from 68.5 million tonnes to 66 million tonnes this year, and that of Argentina from 46.5 million tonnes to 45 million tonnes.

Besides the possible decline of soy output, rapeseed output in the European Union, China and India is also anticipated to fall due to lower profit in the oilseed planting. The USDA predicted that global rapeseed output would go down by around 8% this year to further tighten the rapeseed demand and supply relationship in the wake of rising consumption.

Meanwhile, palm oil exports of Malaysia has been picking up since March mainly boosted by demand from China and India, and its palm oil stocks had dropped to 1.96 million tonnes by the end of March.

On high expectations for further price hikes, China imported 580,000 tonnes of palm oil in March, far higher than 380,000 tonnes in February. Currently, the country's palm oil stocks stand at a high level of 930,000 tonnes and are likely to decrease quickly as peak season for palm oil consumption is approaching.

With supply shortfall of oilseeds across the globe, the recent correction of edible oils futures provides buying opportunities for investors, analysts say, tipping buying point for soyoil on the Dalian Commodity Exchange at RMB9,700/tonne (US$1,538).