Palm oil is trading at an all-time high. Nakul Rastogi, trading director at Pacific Inter-Link, said, “Like any commodities sector, the prices are driven by two factors. The first one is fundamental, which is speculative. Malaysia, and Indonesia are the largest producers of palm oil and we have a derivative exchange in Kuala Lumpur called Bursa Malaysia Derivatives, which is where the prices are derived from or the price discovery is done."
"So in that let us say the price make the new highs in exchange and that is what people have been talking about. It is similar to the exchange in Chicago, and from that exchange, the prices come down, filter down to the physical side, both in Indonesia and Malaysia.”
He added, “I agree that yes, the fundamentals are little tight on terms of the stocks are low, the production is less, crude oil prices are rising and the Indian demand has been very good. That has been good for some time. But at the same time, I still do not think, this is my own personal opinion I still don't think that the fundamentals warrant such kind of price rise to be record high. My own thinking is that there is a speculative element involved in this.”
On availability of palm oil or production, Rastogi said, “We are looking at lower production than last year. I will just give you some small statistics up to August this year, the Malaysian production has only been 7.58 million, whereas the last year the production was 12.72 million so we are short by 1.1 million tonne and from my own reading, I don't think we will make up for this shortfall. We could be seeing the lower production as compared to the earlier this month also, next month, and until the year-end.”
On Indian demand, he said, “The India demand has been excellent, looks like the September one was very high, it was because of the duty everybody was considering that on 30th September the Government of India will change the duty structure and it immediately go higher. So, that is why there have been good shipments in August and September and that is what has resulted in higher exports from Malaysia."
"But my feeling is that India will slow down, considerably slow down because Diwali is just around the corner. They already has this 1.3 million tonne of oil in the country and also there is a crop this is there, which will get harvested so India I think until Diwali probably will not require further imports. November also they may slow down. “
For full interview, watch accompanying video...