Palm oil prices will inch up in 2015 as poor weather in the world's biggest growers curbs output growth, but soaring supplies of rival oilseeds and volatile crude oil markets will offer stiff headwinds to any gains, a Reuters poll showed.

Benchmark prices for palm oil, used in everything from soaps and ice-cream to biofuels, will average 2,400 ringgit ($662) a tonne this year, based on the median estimate in a poll of 22 analysts and traders.

That would be up 0.7 percent from 2,384 ringgit in 2014, a year that saw spot prices plumb five-year lows on worries over rising vegetable oil supplies and tepid demand. They stood around 2,117 ringgit on Friday.

But the poll generated forecasts ranging from 2,000 ringgit to 2,650 ringgit, indicating mixed views on the outlook for the global economy and over the impact of bad weather on harvests in top growers Malaysia and Indonesia.

"There are positive rating drivers, like potential adverse weather reducing output or demand for biodiesels, but a softening economic environment could undermine demand," said Bertrand Jabouley, director of corporate ratings at Standard & Poor's.

Dwindling purchases from top buyers India and China will also pressure prices, analysts said. Those countries respectively take 19 and 14 percent of global palm exports, according to estimates from Singapore bank DBS.

A slowdown in China's economy could cut into its palm imports, while price-sensitive buyers in India may opt for cheaper soy in an oversupplied market.

Industry regulator the Malaysian Palm Oil Board this month predicted palm prices would be volatile between 1,820-2,750 ringgit a tonne in 2015, citing uncertainty in the global economy.

The rout in crude markets that has seen oil prices tumble 60 percent since June could also hit appetite for palm in Indonesia and Malaysia, which have adopted ambitious biodiesel mandates to stoke domestic consumption of palm and whittle down stocks.

The poll saw average palm prices climbing to 2,525 ringgit in 2016.Production of palm oil may see flattish growth this year after monsoon flooding in Malaysia and dry spells in Indonesia stressed trees. Those countries produce about 85 percent of global supply.

Market players are also keeping an eye out for an expected El Nino, which could induce droughts and hinder yields, although experts now doubt the weather pattern will have enough muscle to cause any real damage to crops.

Seven analysts and traders polled expect Malaysian crude palm oil production to rise to between 19.8 and 20.8 million tonnes this year, from 19.67 million in 2014.

Indonesia's output was seen between 31-32 million tonnes, up from 30.5 million tonnes estimated for 2014 by the Indonesian Palm Oil Association.
 

Source:- reuters.com